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After The Hole-In-The-Earnings Gang

Sep 29, 2002 | The Washington Post

President Bush said he was going to round up the corporate crooks and put 'em in jail and last week his posse was plenty busy trying to do just that.

The week began when Qwest Communications, under pressure of a Securities and Exchange Commission investigation, admitted, in effect, that some of its telecom capacity swaps were an accounting gambit and restated its earnings from 2000 and 2001 by $950 million.

Tuesday was Rigas Family Day at the federal courthouse in Manhattan. A grand jury returned a 24-count indictment against John and sons Timothy and Michael on charges that they defrauded investors in Adelphia Communications of $250 million while failing to disclose the $2.3 billion they borrowed from banks with the company as co-borrower. After pleading not guilty, John Rigas vowed a vigorous defense to restore his credibility and that of the now-bankrupt cable empire.

On Thursday, the case against the top brass at WorldCom took a giant step forward as David Myers, the former controller, pleaded guilty to securities fraud and making false filings with the SEC. He told the judge he concocted phony numbers at the behest of unnamed "senior management," against whom he has now agreed to testify.

The same day, Attorney General John D. Ashcroft announced that three former executives at were ready to enter into plea agreements that would have them testify about fraudulent advertising deals with a "major media company" widely reported to be America Online.

By Friday, Citigroup having already paid a fine over the bum advice given by telecom analyst Jack Grubman -- was negotiating with the SEC, the New York Stock Exchange and NASD over splitting its research and investment banking operations.

The only setback for the posse came when Manhattan prosecutors lost their bid Friday to put L. Dennis Kozlowski in the Rikers Island jail pending trial on state tax and fraud charges. A judge ruled that the $10 million bond put up by Kozlowski's ex-wife wasn't part of the $600 million he and associates are alleged to have misappropriated from Tyco International.

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