IP: Inside Inquiry by WorldCom Is Continuing

[Dave Farber <dave () farber net>]

Ine wonders why DOJ would want to curtail the activity. After all it
distracts from the ENRON mess which is dangerous to the Administration.
Hmmm.


Dave
 

July 6, 2002

Inside Inquiry by WorldCom Is Continuing
By SIMON ROMERO

n internal investigation at WorldCom into accounting irregularities is
continuing despite a report that indicated the Justice Department was
seeking to curtail its activities as it conducts its own investigation,
according to the head of the company's internal inquiry.

William R. McLucas, the former chief of the enforcement division at the
Securities and Exchange Commission who is conducting the internal
investigation at WorldCom, said yesterday that he was in steady
communication with the Justice Department, in addition to the S.E.C., which
is also investigating the company's accounting.

"We haven't been told to stop or limit our inquiry," Mr. McLucas said in a
telephone interview yesterday, in response to a report published in The Wall
Street Journal. "In any case, we wouldn't do anything in our inquiry that is
inconsistent with the aims of the Justice Department."

Most internal investigations conducted at corporations that are also facing
a criminal inquiry usually result in a degree of coordination between the
two sets of investigators. It is not unusual for the timing of witness
interviews to be arranged by the two sides to ensure speedy progress for the
criminal investigation. Such coordination is said to be taking place in the
WorldCom case in a manner that will not impede the internal inquiry.

Separately, WorldCom filed a lawsuit in federal court in Jackson, Miss.,
yesterday against Scott D. Sullivan, its former chief financial officer.
WorldCom said in a statement filed with the S.E.C. last week that the board
had fired Mr. Sullivan after an internal auditor uncovered the accounting
irregularities in May.

The company is demanding that Mr. Sullivan pay back the $10 million bonus he
received last year.

Michael Wallace, a lawyer in Jackson for WorldCom, said he could not comment
on the suit.

"I am not authorized to say anything about it," he told The Associated
Press.

Last week, WorldCom's board hired Mr. McLucas, who is also co-chairman of
the securities practice at the Washington law firm of Wilmer, Cutler &
Pickering, to conduct an investigation into accounting practices that
resulted in the improper recording of more than $3.8 billion of expenses in
2001 and 2002. 

A Justice Department spokesman could not be reached for comment yesterday.
Bradford Burns, a spokesman for WorldCom, declined to comment.

"We're doing what we're doing," Mr. McLucas said yesterday when asked to
describe his investigation. He declined to comment further.

The S.E.C. has already filed fraud charges against WorldCom and is looking
into the possibility that the company improperly accounted for its reserves
going back to 1999.

In addition to the internal inquiry and the investigations at the Justice
Department and the S.E.C., the House Financial Services Committee plans to
hold a hearing on WorldCom on Monday.

The committee withdrew invitations sent to Cynthia Cooper, the internal
auditor who discovered the accounting irregularities, and Max E. Bobbitt,
chairman of WorldCom's audit committee, out of concern that their testimony
might limit the effectiveness of the continuing federal investigations.




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