IP: "the biggest case of corporate fraud in U.S. history."

[David Farber <dave () farber net>]

WorldCom: $3.7B Illegally Documented
By THE ASSOCIATED PRESS

Filed at 8:40 p.m. ET
JACKSON, Miss. (AP) -- WorldCom Inc. said Tuesday it had documented more 
than $3.7 billion in expenses after an internal investigation uncovered 
what appears to be the biggest case of corporate fraud in U.S. history.
More than $3 billion in 2001 and $797 million for the first quarter of 2002 
was illegally documented as capital expenditures, the company said.
As a result, the company said it will restate its earnings for all of 2001 
and the first quarter of 2002.
``Our senior management team is shocked by these discoveries,'' John 
Sidgmore, who was appointed WorldCom CEO on April 29, said. ``We are 
committed to operating WorldCom in accordance with the highest ethical 
standards.''
WorldCom said it has notified its auditors, KPMG LLP, and has asked it to 
conduct a comprehensive audit of the company's financial statements for 
2001 and 2002.
In a report on its Web site Tuesday night, The Wall Street Journal said 
WorldCom's chief financial officer, Scott Sullivan, who is also a director, 
has been dismissed from the company.
``I want to assure our customers and employees that the company remains 
viable and committed to a long-term future,'' Sidgmore said. ``I have made 
a commitment to driving fundamental change at WorldCom, and this matter 
will not deter the new management team from fulfilling our plans.''
The news could be a body blow to WorldCom, which is reeling from a low 
stock price, a crumbling telecoms market and an ongoing Securities and 
Exchange Commission investigation.
Shares of Clinton-based WorldCom dropped sharply in after hours trading, 
falling 57 cents to 26 cents a share, down 68 percent from its closing 
price of 83 cents.
Shares of WorldCom this year traded as high as $15 in January but have free 
fallen since over concerns about the company's $32 billion in debt, slowing 
revenues and the SEC investigation.
In March, the SEC requested documents detailing pretax charges associated 
with domestic and international wholesale accounts that were no longer 
deemed collectible.
The SEC investigation also focused on disputed customer bills and sales 
commissions, loans by WorldCom to officers and directors, customer service 
contracts and organizational charts and personnel records for former employees.
Drawing scrutiny and investor displeasure were the $408 million in loans 
WorldCom gave to former chief executive Bernie Ebbers, who resigned in April.
Bond ratings agencies Moody's Investors Service, Standard & Poor's and 
Fitch all cut their long-term credit ratings on WorldCom's debt several 
times this year.
Shares of WorldCom on Monday closed down 25 percent after Salomon Smith 
Barney analyst Jack Grubman, long seen as a WorldCom supporter, downgraded 
his outlook on the company.

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