WorldCom cooked the books back in 2000
Accounting irregularities at fallen telecommunications giant WorldCom Inc. stretch back to 2000, one year earlier than previously believed, a congressman investigating the company said on Sunday.
Internal WorldCom documents show the company’s then-chief financial officer rebuffed complaints from at least two employees that it was artificially inflating profits as far back as April 2000, Louisiana Republican Rep. Billy Tauzin said on ABC’s “This Week.”
Scott Sullivan, the company’s long-serving CFO, was fired last month for his role in inflating profits by transferring $3,85-billion in expenses to capital spending accounts over 15 months starting in 2001.
Tauzin, who is leading a congressional investigation into the matter, said five boxes of internal company documents showed that Sullivan and other top managers tried to quash employee concerns about accounting methods a year earlier.
“The documents ... reveal a strange pattern of people inside the corporation discovering it, trying to do something about it, and ultimately failing until recently,” said Tauzin, who chairs the House of Representatives Energy and Commerce Committee.
A finance department employee named Troy Normand pointed out bookkeeping problems in 2000 to Sullivan and company controller David Myers, and contemplated resigning after he was assured there was nothing wrong, Tauzin said.
“There’s quite an insight in these documents as to how corporate greed took over, and how, beginning in the year 2000 actually, the company began shifting ordinary expenses over to capital accounts,” he said.
In a separate incident in April 2000, a London employee named Stephen Brabbs notified auditor Andersen after Sullivan reclassified $33,6-million in expenses as capital spending, he said, allowing the charges to be written off over several years.
“This is way beyond aggressive accounting. This is Fraud 101, you know, basic illegal conduct,” Tauzin said.
Andersen, which was fired by WorldCom earlier this year, was convicted June 15 of criminally obstructing justice in the government’s probe of collapsed giant Enron Corp.
Sullivan said he told former CEO Bernard Ebbers about the accounting problems, a charge Ebbers has denied.
A WorldCom representative declined to comment on Tauzin’s charges, but said the company was cooperating with all external investigations.
“We want all wrongdoers brought to justice so that the company can move forward,” WorldCom representative Brad Burns said.
The Justice Department has launched an investigation, and the Securities and Exchange Commission has sued the company. - Reuters