MCI Hit With Criminal Charges
Oklahoma AG charges Ebbers, Sullivan, others with 15 counts of violating state securities lawsAug 27, 2003 | CNNfn
Oklahoma Attorney General W. A. Drew Edmondson filed criminal securities charges in Oklahoma City Wednesday against WorldCom, its former CEO Bernard Ebbers, and five other former WorldCom officials.
The defendants are charged with 15 counts of violating the Oklahoma Securities Act.
Also charged are former Chief Financial Officer Scott Sullivan, former Controller David Myers, former Director of Accounting Buford Yates, and accountants Troy Normand and Betty Vinson, all of whom also face federal criminal charges.
"We don't think [WorldCom's] bankruptcy plan protects the interest of Oklahoma or its people," Edmondson said at a news conference Wednesday. "I'd be surprised if Oklahoma remains the only state to file charges against WorldCom or its officers."
WorldCom, now doing business as MCI, currently is in Chapter 11 bankruptcy protection, after an $11 billion accounting scandal.
"We intend to fully cooperate with the Oklahoma state Attorney General, but we do not believe this action will impact the bankruptcy process," the company said in a written statement Wednesday. "MCI remains on track for its confirmation hearing before the federal Bankruptcy Court, which is scheduled to begin on September 8, 2003."
Former CEO Bernard Ebbers was one of six charged Wednesday.
U.S. Attorney General John Ashcroft had appealed to Oklahoma's governor to hold off on the charges because they could interfere with an ongoing federal investigation, according to a well-placed source.
The Justice Department has yet to file charges against Ebbers or the company.
Accounting scandals at WorldCom, Enron, Tyco, Global Crossing and other companies sent shock waves across corporate America and spurred Congress to pass the Sarbanes-Oxley law mandating improved corporate governance.
WorldCom did reach a civil settlement with the Securities and Exchange Commission that requires it to pay $500 million cash plus new stock valued at $250 million. The proceeds are to benefit victims of the WorldCom fraud.
The company has been proceeding with plans to emerge from Chapter 11 protection. A confirmation hearing on the company's reorganization is scheduled to begin Sept. 8.
Competing telecom companies hope to block the reorganization. AT&T, SBC Communications and Verizon charge MCI rerouted calls to avoid paying access fees to other telecom companies.
As a result of the charges, MCI has been barred from receiving new federal contracts.
MCI spokesman Brad Burns said, "While we haven't received details from the state AG, the notion that former WorldCom executives committed fraud is not new news."
"We look forward to working with the state AG to help us put our past behind us. We knew it was going to be noisy leading in to our confirmation hearing," Burns added.
In an effort to reform WorldCom's corporate practices, a court-appointed monitor who spent a year sifting through MCI's problems outlined 78 directives in a report Tuesday aimed at preventing the abuses that were instrumental in the company's $11 billion accounting scandal.