Former WorldCom Executives Indicted For Securities FraudBy Carrie Johnson and Jonathan Krim
THE WASHINGTON POST -- A federal grand jury in New York Wednesday indicted two former WorldCom Inc. executives on securities fraud charges while three other officials at the telecommunications giant indicated that they are prepared to admit wrongdoing and cooperate with prosecutors in the fast-paced investigation.
Scott Sullivan, WorldCom’s onetime chief financial officer, and Buford Yates Jr., the company’s director of general accounting, “falsely and fraudulently” reduced the company’s expenses in an effort to inflate earnings by $5 billion, according to the first formal criminal charges stemming from the nation’s largest ever bankruptcy.
Sullivan and Yates also made false statements about WorldCom’s finances in filings with the Securities and Exchange Commission, the seven-count indictment charged.
The indictment of Sullivan was foreshadowed early this month when he and another WorldCom executive were paraded in handcuffs before television cameras in New York as part of a Bush administration crackdown on corporate malfeasance. The cooperation by other WorldCom officials is likely to increase the pressure on Sullivan, experts said.
“The charges filed today reflect our commitment to pursue fraud cases both up and down the corporate ladder,” James Comey, U.S. attorney for the Southern District of New York, said in a prepared statement Wednesday. “We will prosecute the CFOs and controllers who give the orders from the top to commit white collar crimes. But we will also prosecute corporate officials at all levels who knowingly carry out criminal schemes which defraud the investing public.”
Yates was a senior WorldCom finance official who left the company recently. His attorney, David Schertler, said he has not had a chance to review the indictment carefully and could not comment.
Sullivan’s lawyer, Irvin Nathan, said in an interview that his client will plead not guilty to the charges.
“We are diligently preparing his defense,” Nathan said. “We continue to look forward to our day in court and we hope by the time this case comes to trial the media frenzy fanned by politicians has calmed down.”
WorldCom has joined Enron Corp. as a symbol of the improper accounting some companies used to deceive investors during the stock market bubble of the late 1990s.
WorldCom is the parent company of Arlington, Va., long distance phone firm MCI and UUNet, the Ashburn, Va., Internet service provider that carries a big chunk of the world’s Internet traffic.
WorldCom filed for bankruptcy protection in July after disclosing it had falsely booked $3.9 billion in expenses over the past five quarters. Earlier this month, the company reported that it had mishandled $3.8 billion more, in the form of reserve accounts designed to cushion it from losses.