Lead Plaintiff's Memorandum of Law in Opposition to Defendants'

whatever necessary” to get WorldCom’s margins back in line.
99(b). Sullivan later instructed
Myers to tell Bosley that “he needs to get to work now” on ensuring the fictitious numbers were input as
soon as possible. 99. At the same time, WorldCom’s internal audit department was instructed not to
do any auditing or review of the Company’s financial statements. 102. Almost simultaneously,
WorldCom began to fraudulently capitalize billions of dollars of line cost expenses, radically inflating
earnings. 107.
Despite various Defendants’ efforts to inflate the Company’s financial results, WorldCom’s
stock price had fallen from a Class Period 8 high of $65 ( 6) to $27 by the end of September 2000 (
299). As a result, Ebbers, who had secured huge loans using his WorldCom stock as collateral, faced
margin calls from his lenders, which would have required him to sell material amounts of his WorldCom
stock. 297(a). Accordingly, from September through December 2000, the Board “loaned” Ebbers
$100 million of the shareholders’ money and guaranteed an additional $100 million of Ebbers’ loans
from Bank of America. 297(c). Since these corporate loans were also secured by Ebbers’
WorldCom stock, Ebbers and every member of the Board knew that, if WorldCom did not make its
numbers, WorldCom’s stock would collapse and its high-profile CEO would face financial ruin. 297.
As The Wall Street Journal later reported, the Board and WorldCom’s senior management felt
enormous pressure to report strong earnings, a “horrible, miserable environment because the CEO was
margined out of his mind.” Id.
Yet another gatekeeper, the Audit Committee of the Board, composed of Defendants
Max Bobbitt, Judith Areen, James Allen, and Francesco Galesi, also failed to discharge its heightened
8
As defined in the Complaint, the Class Period encompasses the period between April 29,
1999 and June 25, 2002.
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