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Sullivan Facing More Charges

Former WorldCom exec accused of lying on financial statements

Apr 17, 2003 | The Clarion-Ledger

The government filed new charges Wednesday against former WorldCom executive Scott Sullivan, accusing him of lying on financial statements to secure $4.25 billion in credit for the company.

Sullivan was already charged with ordering WorldCom accountants to move operating expenses off the books, making the telecommunications giant appear profitable when it was losing money.

He has previously pleaded innocent to the initial charges, which include securities fraud and making false financial filings to government regulators.

Sullivan was chief financial officer at Mississippi-based WorldCom when investigators say the company carried out a $9 billion accounting fraud, the largest in U.S. history. Recent reports have said the number may reach $11 billion when WorldCom, which changed its name to MCI, finishes an internal investigation into the scandal.

In addition to the name change, the company moved its headquarters from Clinton to Ashburn, Va.

A new indictment unsealed in federal court in Manhattan adds charges of bank fraud and making false statements to the counts Sullivan already faced.

The new charges could signal plea talks between the government and Sullivan have broken down as prosecutors consider a case against former WorldCom CEO Bernard Ebbers, said Robert Mintz, a former federal prosecutor.

"It's an indication that the government is sharpening its knives for trial against Sullivan," he said. "Sullivan by all accounts would be a critical witness if the government hopes to bring charges against Bernie Ebbers."

Sullivan faced 65 years in possible prison time on the original charges — conspiracy, securities fraud and false SEC filings. The new charges add 120 years to his potential sentence.

Any sentence would likely be much less under federal sentencing guidelines if Sullivan were convicted.

Sullivan's lawyer, Irv Nathan, did not immediately return a call for comment on the new charges. In the past, he has said his client is a scapegoat who is a victim of a rush to judgment by prosecutors.

The new charges accuse Sullivan of using false financial statements to obtain loans in 2001 from Bank of America, Chase Manhattan Bank, Citibank and other lending institutions.

The indictment says Sullivan provided the banks financial statements that hid WorldCom costs and lowered its publicly reported expenses resulting in higher earnings for the company.

In one bank letter, prosecutors charge, Sullivan said the financial statements were "complete and correct in all material respects."

Sullivan, 40, who lives in Boca Raton, Fla., is free on $10 million bail on the original charges. He had argued to have his trial moved on grounds a New York trial would be an unfair financial burden, but a judge denied his request.

His trial is scheduled to begin Sept. 8. His next court hearing is scheduled Tuesday.

Court papers said Sullivan was the highest paid CFO in the United States in 1997, receiving $19 million in salary, bonuses and other compensation.

Besides his salary, he also made more than $45.3 million by selling WorldCom stock between 1995 and 2000, according to the court papers.

In addition to Sullivan, four other former WorldCom executives were charged in the fraud investigation. All four, including former controller David Myers, have pleaded guilty and agreed to cooperate with investigators.

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