Bankrupt telecommunications firm WorldCom Inc. said it uncovered another $3,3-billion in bogus accounting, adding to the $3,85-billion fraud it revealed in June.
The newest discovery on Thursday was made as the company reviewed its books for 1999 and 2000, with most of it tallied in 2000, the company said Thursday night.
The fraudulent accounting already revealed occurred in 2001 and the first half of 2002. The additional fraud would bring the total of phony accounting at WorldCom to about $7-billion. WorldCom said it will restate its financial reports for all of 2000 as a result of the new findings.
The Clinton, Mississippi-based company admitted on June 25 that it falsely accounted for $3,8-billion in expenses. The inflated revenues allowed the company to report profits when it otherwise would have losses. That day, it fired its chief financial officer, Scott Sullivan, who was subsequently accused by the company’s auditor, Arthur Andersen, of withholding crucial information about
WorldCom’s bookkeeping.
In a statement, the company said it is continuing its own internal investigation into its financials. It said that investors and creditors ”should be aware that additional amounts” of improperly reported EBITDA, or earnings before interest, taxes, depreciation and amortisation, and other pretax income ”may be discovered and announced”.
The company’s auditor, KPMG LLP, is auditing WorldCom’s financial statements for 2000-2002. Until that’s finished, the total impact won’t be known, the company said.
Arthur Andersen LLP had been WorldCom’s auditor until May. WorldCom also said it will likely write off $50,6-billion in goodwill and other intangible assets, too.
Last week, Sullivan and controller David Myers were arrested and charged with hiding the nearly $4-billion in expenses and lying to investors and regulators in a desperate bid to keep the company afloat.
When WorldCom made its disclosure in June, it said it would go back and review financials from prior years.
The fraud in 2000 is said to differ from the techniques used in 2001 and 2002, according to CNBC.
In the latest case, the report said, Sullivan is believed to have used a variety of techniques to bolster operating income, including reversing reserves for bad debts into operating income. – Sapa-AP