Oklahoma Files Criminal Charges Against WorldCom

[Dave Farber <dave () farber net>]

> Oklahoma Files Criminal Charges Against WorldCom
>
> August 27, 2003
>  By THE ASSOCIATED PRESS
>
>
>
>
>
>
> Filed at 11:22 a.m. ET
>
> OKLAHOMA CITY -- The Oklahoma attorney general Wednesday
> filed the first criminal charges against former WorldCom
> Inc. chief Bernard Ebbers, part of a wider complaint that
> also named the telecommunications company now known as MCI
> and other one-time top executives.
>
> The complaint accuses Ebbers, the other executives and the
> company of violating state securities laws by giving false
> information to investors in 2000, before MCI collapsed into
> the nation's largest bankruptcy last year amid an
> accounting scandal that has grown to $11 billion.
>
> "It is rare that we name a company in a criminal complaint,
> but in this case it is justified," Oklahoma Attorney
> General Drew Edmondson said. "The decision to commit this
> fraud was a company decision. This is not some rogue
> employee trying to line his own pockets. This was a
> conscious decision made for the benefit of the company."
>
> Although this marks the first criminal charges against
> Ebbers and the company itself, other former WorldCom
> executives have been charged in federal court, including
> ex-chief financial officer Scott Sullivan, who was also
> named in the Oklahoma complaint.
>
> Four other ex-executives have pleaded guilty to federal
> charges and are helping prosecutors, and are also charged
> in Oklahoma: David Myers, Buford Yates Jr., Betty Vinson
> and Troy Normand.
>
> The charges against the former executives carry up to 10
> years in prison and a $10,000 fine, Edmondson said. The
> company could be fined.
>
> The charges come as MCI is trying to move on from the
> accounting scandal, which has already led to a $750 million
> settlement with the Securities and Exchange Commission.
>
> A report Tuesday from court-appointed monitor Richard
> Breeden, a former SEC chairman, set down a new framework
> for MCI's future governance and said the company is
> expected to emerge from bankruptcy shortly.
>
> "We're looking forward to working with the Oklahoma
> attorney general's office as we work to put the past behind
> us," MCI spokeswoman Claire Hassett said. "The fact the
> former WorldCom executives committed fraud is not new news.
> They've been out of the company for months."
>
> The complaint alleges WorldCom executives schemed to
> defraud investors by understating company expenses and
> overstating income. False statements were entered in the
> company's annual report to the SEC filed March 30, 2001,
> the complaint stated.
>
> The complaint said Sullivan instructed Myers to make
> journal entries crediting certain expense accounts. Yates,
> Vinson and Normand made the entries at Myers' direction, it
> said.
>
> To make the entries balance on WorldCom's general ledger,
> the employees debited various reserve and capital accounts
> without having supporting documentation or "any proper
> business rationale for the entries," according to the
> complaint.
>
> "By falsifying information, the company looked stronger on
> paper than it really was," Edmondson said. "Investors
> counted on this information when buying WorldCom
> securities. The company lied. These employees lied. The law
> was broken. It's just that simple."
>
> Although MCI has settled the SEC's civil case, the company
> has been under investigation from several states. It also
> faces a federal criminal investigation and was recently
> barred from signing new contracts with the U.S. government.
>
>
> In May, Edmondson, attorneys general from West Virginia and
> Massachusetts and the Alabama Securities Commission filed
> objections to court approval of MCI's disclosure statement
> with its Chapter 11 reorganization plan.
>
> In the 1990s, Ebbers was one of the hardest-charging
> figures in the telecommunications industry as he grew
> WorldCom with a series of acquisitions. But investigative
> reports commissioned by courts and the company have said he
> steered WorldCom through several questionable moves with
> the help of a rubber-stamp board.
>
> Ebbers attorney Reid Weingarten said he could not
> immediately comment.
>
> http://www.nytimes.com/aponline/business/AP-WorldCom-Oklahoma.html?ex=1063002469&ei=1&en=a67f1b8ebd257c5c
>
>
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