WorldCom's $408 Million Man

The buck still stops in Jackson, Miss. Just ask Bernie Ebbers, deposed monarch and now chairman emeritus of WorldCom.

In an SEC filing yesterday, WorldCom reported that Ebbers' debt to the company he helped create totals $408.2 million, up from the previously estimated $365 million. The company said it consolidated all of Ebbers' various personal loans on April 29, the day he resigned as president, CEO and director of WorldCom.

Ebbers will have five years to pay back the consolidated loan at a fluctuating interest rate that, at the end of April, stood at 2.32% per year. Ebbers must pay back $25 million in principal next year, $25 million in 2004, $75 million in 2005, $100 million in 2006 and all remaining principal by 2007.

Am I alone in wondering how one person could possibly spend $408 million? The SEC filing simply says that Ebbers used the loans from WorldCom to repay debts that were secured by his shares of WorldCom stock and that the proceeds of these secured loans were used for "private business purposes."

Let's put this into perspective. $408 million is no small chunk of change. Consider that just last week, KPMG said it could spend as much as $400 million in cash and stock to buy Andersen's consulting business. $400 million could also get you 40% of the equity of XO Communications under the terms of a deal proposed by Forstmann Little and Telmex.

I have yet to see a detailed account of just where all that money went. Over the years, Ebbers has purchased a yacht and a refrigerated trucking company. He also owns what purportedly is the largest ranch in Canada.

But the real-estate market in rural British Columbia isn't exactly on fire. So where did that money go? Neither Ebbers nor WorldCom will say.

Yesterday's SEC filing gets even better. As chairman emeritus, Ebbers won't draw a paycheck, but he will receive an annual $1.5 million pension for the rest of his life. Ebbers may have in fact already received his first payment, which was scheduled for May 1, or "as soon as practicable following May 1, 2002," according to the filing.

Odds are that deal, which includes lifetime insurance coverage as a sweetener, is just a little better than the one offered to the other 3,700 or so WorldCom employees who have been laid off so far this year.

The average employee made $24,668 in 2000, according to Business Week. In 2000, Ebbers' total compensation, including salary, long-term compensation, bonus and already exercised stock options, totaled $34,536,000. That's a comparative ratio of 1,400 to 1.

According to researchers from Institute for Policy Studies and United for a Fair Economy, the average ratio of CEO to worker compensation was 531 to 1 that year.

"WorldCom CEO Bernard Ebbers represents one of the most extreme examples of how workers and CEOs are doing during the downturn," they wrote in a report titled "Executive Excess 2001." "Once the stock began to fall, Ebbers — unlike most Americans — was lucky enough to be at the helm of a company that cushioned him from his own reckless investment decisions."

It appears that WorldCom is still cushioning his fall.

Copyright © 2002 Ziff Davis Media Inc. All Rights Reserved. Originally appearing in The Net Economy.