Ex-WorldCom Executive Yates Pleads Guilty To Conspiracy, Securities FraudOct 7, 2002 | The Wall Street Journal
The former director of general accounting for WorldCom Inc. pleaded guilty Monday to two felony counts of conspiracy and securities fraud, acknowledging his role in the company's $7.2 billion accounting scandal.
Buford Yates, 46 years old, of Brandon, Miss., is the second executive to plead guilty to criminal charges related to WorldCom's accounting fraud. He is expected to cooperate with the government in its ongoing investigation of the company.
Last month, David F. Myers, the former controller of WorldCom, pleaded guilty to one count each of securities fraud, conspiracy to commit securities fraud, and making false filings with Securities and Exchange Commission (news - web sites). Mr. Myers told a federal judge he helped manufacture profits at the behest of "senior management" as part of a scheme to defraud investors and meet Wall Street expectations.
During the proceeding, Mr. Yates quietly told the judge that he followed orders from his supervisors, former WorldCom financial chief Scott Sullivan and Mr. Myers, to make accounting adjustments that artificially boosted WorldCom's profits.
"I was surprised by the amount of the adjustment ... which (was) highly unusual in light of WorldCom's past practices," he told U.S. Magistrate Judge Andrew J. Peck.
But while he "expressed concern" to his supervisors, he nevertheless conspired with others to capitalize expenses and increase the revenue reported to the SEC.
"I came to believe that the adjustments I was being directed to make in WorldCom's financial statements had no justification and contravened generally accepted accounting principles," Mr. Yates told the judge.
The former executive faces up to 15 years in prison, although he will likely receive less because of his cooperation.
Prosecutors say Mr. Sullivan, who was indicted in August, orchestrated the massive fraud. He has pleaded not guilty. Mr. Myers pleaded guilty in September and is expected to be a crucial witness in the government's case against Mr. Sullivan.
During the proceeding, Mr. Yates specifically mentioned Messrs. Sullivan and Myers, but made no reference to Bernard J. Ebbers, WorldCom's former chief executive. Mr. Ebbers hasn't been charged with any wrongdoing.
But outside the Manhattan federal courthouse, Mr. Yates's attorney David Schertler confirmed that his client was cooperating with prosecutors, and suggested that WorldCom's most senior officers knew of the fraud.
He told reporters that Mr. Yates "strenuously objected" to making the adjustments to WorldCom's ledger.
"When he raised those objections, he was told that they had been approved at the highest levels of WorldCom management," Mr. Schertler said.
He declined to elaborate. Earlier Monday, he noted that any information that Mr. Yates could provide about Mr. Ebbers "would be part of his cooperation with the government."
Mr. Schertler said Mr. Yates is "very sorry" and has been cooperating with authorities for two months.
Reid Weingarten, a lawyer for Mr. Ebbers, couldn't immediately be reached for comment.
During last month's proceeding, Mr. Myers pleaded guilty to three felony counts, saying he was directed by WorldCom's senior management to pump up numbers as part of a scheme to defraud investors and meet Wall Street expectations. He didn't provide any names.
WorldCom, based in Clinton, Miss., disclosed in June that it hid $3.8 billion in expenses and falsely posted profits over a five-quarter period beginning in early 2000.
The company, which has since filed the largest bankruptcy in history, later expanded its planned financial restatement to $7.2 billion.
The government has indicated that Betty Vinson and Troy Normand, who served in lower-level posts at the company, are cooperating and will potentially plead guilty in the case.
Mr. Yates is scheduled to be sentenced Jan. 9.