Ex-WorldCom CFO Tried To Delay ReviewJul 9, 2002 | AP
WorldCom Inc.'s fired chief financial officer Scott Sullivan apparently tried to delay a review of the telecom giant's books by a quarter after a company accountant told him about discrepancies she had found.
Sullivan was fired last month after the Clinton-based company revealed more than $3.8 billion in accounting problems.
The details were highlighted Monday in WorldCom's revised filing to the Securities and Exchange Commission. The SEC, which is investigating the company, had asked for more details about the accounting after it blasted WorldCom's first filing late last month.
The unraveling of the nation's No. 2 long-distance telephone provider began with a discovery by internal auditor Cynthia Cooper, who was in the midst of a routine audit in May when she noticed some questionable transfers.
The audit of WorldCom's capital expenditures and capital accounts had been scheduled for the third quarter of 2002, but Cooper advanced it, the company said in its new filing.
The statement said Cooper discussed her investigation with Sullivan on June 11, and Sullivan asked her to delay her review until the third quarter.
At a June 20 audit committee meeting, Sullivan stated he had originated the request for Cooper's review, "but that he had asked Ms. Cooper to hold off on her report to allow him to address the situation."
In the revised filing, WorldCom said its then-auditor, Arthur Andersen LLP, reported no problems with the telecom's 2001 financial statements during a meeting in February.
WorldCom said in its latest filing that its audit committee met Feb. 6 with Andersen to discuss an audit of the telecom's operating results and financial position for the year ending Dec. 31.
Andersen noted there were "no significant or unusual transactions" and that it had "no disagreements with management" regarding accounting positions.
WorldCom is teetering on bankruptcy after disclosing June 25 it disguised nearly $4 billion of expenses as capital expenditures to appear more profitable.
Andersen, WorldCom's accountant during the five quarters in question, has said its work was in compliance with SEC standards. It has suggested that Sullivan was to blame and claims important information was withheld from auditors.
The SEC has filed a civil fraud suit, and the Justice Department also is investigating.
In testimony Monday before a House panel probing the scandal, WorldCom Chairman Bert Roberts called Andersen's failure to uncover the irregularities "inconceivable."
Testifying Monday before the House panel, former Andersen partner Melvin Dick said auditors rely "on the honesty and integrity of the management of the company."
Sullivan invoked his Fifth Amendment right against self-incrimination Monday before a packed hearing of the House Financial Services Committee.
WorldCom filed a federal lawsuit against Sullivan last week demanding that he pay back the $10 million bonus he received last year.