Internal E-Mails Show WorldCom Officials Tried To Hide Worsening FinancesSep 3, 2002 | Dow Jones Newswire
WorldCom Inc. executives sought to conceal the company's deteriorating finances from financial-rating agencies and media critics, according to internal e-mail correspondence released late Tuesday.
"They really put up a smokescreen," said House Financial Services Committee spokeswoman Peggy Peterson.
WorldCom supplied the e-mails in response to a request from committee chairman Michael Oxley (R., Ohio). It had requested confidential treatment for the documents.
In correspondence dated April 8, former WorldCom Chief Financial Officer Scott Sullivan played down questions from Moody's Investors Service, saying a planned write-off would likely come in "at the low end of the range" estimated between $ 15 billion to $20 billion. He was indicted last week on charges of engineering a $7.2 billion fraud at the telecom firm.
Mr. Sullivan vented in other e-mails about criticism of low-cost loans to former WorldCom Chief Executive Bernard Ebbers, calling newspaper accounts of the loans "a bunch of made-up stuff."
In May, Mr. Sullivan weighed in on a pending article on the company in The Wall Street Journal. A WorldCom spokeswoman alerted him to the story and said the reporter had been told "bankruptcy is not an option" for the telecommunication company.
Mr. Sullivan agreed, writing that "we are facing our real issues, which are not liquidity issues." He called an investigation by the Securities and Exchange Commission "an overhang" and struck an optimistic note, saying, "We will work through it."
WorldCom announced a massive accounting problem in late June, and declared bankruptcy in July. Mr. Sullivan's upbeat assessment came "a mere 20 days before the walls started to come down," noted Ms. Peterson.
Correspondence from former Salomon Smith Barney analyst Jack Grubman, a longtime booster of WorldCom stock, was included in the material released Tuesday. He quickly alerted Mr. Sullivan on March 12 when Salomon removed WorldCom's stock from the firm's recommended list, informing him within minutes of being told himself, according to the e-mails.
Mr. Grubman took care to distance himself from the decision, saying the move was made by Salomon's strategist, not him.
Mr. Sullivan, in turn, passed the message along to Mr. Ebbers, said Ms. Peterson. She added the relay shows "Ebbers wasn't a completely detached CEO who didn't know what was going on" within the company.
"We're fully cooperating with all the investigative bodies, supplying information to them upon request," said WorldCom spokesman Bradford