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Ebbers $400M in loans from WorldCom Former WorldCom CEO Bernie Ebbers received more than $400 million in corporate loans and guarantees from late 2000 to early 2002. A report this week issued by the bankruptcy-court examiner looking into accounting fraud at WorldCom revealed new details — and questions — about the company's dealings with Ebbers. A look at Ebber's loans:
Sept. 6, 2000. WorldCom's compensation committee — a subcommittee of the board of directors — approves the first loan for $50 million.
Some of the loans and loan guarantees were not approved by WorldCom's full board — and some money was spent before some directors were aware that money was lent.
While CEO, Ebbers obtained $1 billion in personal and business loans, which he guaranteed or pledged WorldCom stock as collateral. As WorldCom's stock fell in late 2000, Ebbers' lenders began demanding payment of some portion of his debt through margin calls. He satisfied many of those calls through loans and guarantees from WorldCom. The board justified the loans because if Ebbers had sold his millions of shares at once, WorldCom's stock price might have fallen more. The examiner says Ebbers put the company's shareholders at risk by borrowing heavily against his stock.
Oct. 27, 2000. As WorldCom shares continue to slide, Ebbers faces additional margin calls from lenders. To help him cover those, WorldCom's compensation committee grants Ebbers an additional $25 million loan and a $75 million loan guarantee. Five days later, on Nov. 1, Ebbers and Stiles Kellett sign an agreement covering the two loans and the loan guarantee.
Nov. 14, 2000. Less than six weeks after making its first loan to Ebbers, WorldCom's compensation committee agrees to increase its coverage on his debts by increasing Ebbers' loan guarantees to $100 million from $75 million.
Nov. 16, 2000. WorldCom's loans and loan guarantees are disclosed to the board, two days after being included for the first time in a company report to the Securities and Exchange Commission. There's no evidence that the full board knew of, or formally approved, them before they were made. Minutes from two prior board meetings contain no mention of the loans or the guarantees.
Former compensation committee chief Kellett later says in-house WorldCom attorney P. Bruce Borghardt told the committee that full board approval wasn't necessary. Borghardt later tells investigators that he was never asked for an opinion regarding the need for full board approval of Ebbers' loans.
Dec. 27, 2000. As WorldCom stock price continues to plummet, Ebbers' lenders trigger additional margin calls. WorldCom's compensation committee decides to extend an additional $25 million loan to Ebbers.
Jan. 30, 2001. Compensation committee replaces existing $100 million guarantee with a guarantee for $150 million, plus additional payments, including a letter of credit relating to Ebbers' financial support of Mississippi College, his alma matter.
WorldCom eventually pays almost $199 million under the guarantee, plus a deposit of $36.5 million to collateralize the Mississippi College letter of credit. Ebbers' financial statement reflects a personal net worth of $295 million at the end of 2001.
Jan. 25, 2002. With the telecommunications industry bubble long burst and WorldCom shares continuing to founder, WorldCom's compensation committee agrees to make a fourth loan to Ebbers, lending him $65 million.
As with the company's previous loans, this one has an interest rate substantially lower than rates charged by commercial banks, saving Ebbers millions in interest payments.
April 29, 2002. In connection with Ebbers' resignation, WorldCom consolidates his loan and guarantee arrangements into a single promissory note worth $408.2 million. It's repayable by 2008. The principal includes nearly $200 million WorldCom paid to a lender to satisfy Ebbers' debt and $165 million that WorldCom lent Ebbers. It's later determined that he used $27 million for purposes unrelated to the margin calls that the company loans were designed to cover. Among them: $3 million to family, friends and associates and $1.8 million to build a home.
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