New York – The wife of Scott Sullivan, the former WorldCom Inc. chief financial officer now serving a five-year prison term for helping lead an $11 billion fraud, can keep $2.2 million under a proposed settlement of a U.S. lawsuit.
The Securities and Exchange Commission last week announced a $13.6 million settlement of a civil suit against Sullivan, 44, who pleaded guilty to fraud and was the star witness against his boss, WorldCom founder Bernard Ebbers.
The SEC said it would waive Sullivan’s payment because of his “demonstrated inability to pay.” SEC lawyer Peter Bresnan said at a hearing Wednesday in New York federal court that Sullivan transferred $2.24 million to a trust for his wife Carla and their daughter after receiving a $10 million bonus from WorldCom in 2000. Because Sullivan lacks control over the trust, the SEC declined to pursue the money, he said.
“We determined there was no more money we could get from Mr. Sullivan,” Bresnan told U.S. District Judge Jed Rakoff, who is weighing whether to approve the SEC’s accord with Sullivan and another ex-WorldCom official, chief accountant Buford Yates, whose $360,000 payment would also be waived by the SEC. Yates is serving a one-year prison term.
Sullivan’s lawyer, Irv Nathan, told Rakoff that the trust, which had previously been confidential, was earmarked for the care of Sullivan’s wife and daughter.
WorldCom, once the No. 2 U.S. long-distance company, collapsed in July 2002 after disclosing it inflated revenue and hid expenses to meet Wall Street expectations. The company is now part of Verizon Communications Inc.
Ebbers, 64, the founder and former chief executive of WorldCom, was convicted of fraud last year and sentenced to 25 years in prison. A federal appeals court in New York upheld his conviction last week.
Sullivan previously agreed to surrender a 30,000-square-foot mansion he was building and more than $200,000 from a retirement plan.
Investors who sued WorldCom’s banks and former executives were to receive the proceeds from the sale of the house, priced at about $9 million, as part of a settlement.
