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Sullivan to Face New Allegations

U.S. Plans to Broaden Case Against Former WorldCom Official

Dec 24, 2003 | Washington Post

Federal prosecutors said Tuesday they intend to show that former WorldCom Inc. chief financial officer Scott D. Sullivan was involved in 13 kinds of accounting fraud in addition to the financial wrongdoing with which he is charged.

Sullivan, 42, is facing trial on 11 counts, including conspiracy, bank fraud, securities fraud and filing false statements with regulators. They all relate to his role in $11 billion in accounting irregularities that forced the firm into bankruptcy last year.

A federal grand jury alleged that WorldCom officials improperly treated a kind of operating expense known as "line costs" as capital expenses to make the company's earnings look better than they were.

Sullivan also is facing state charges in Oklahoma.

Lawyers for Sullivan have said they intend to argue that other telecommunications firms were doing the same thing.

On Monday, the office of U.S. Attorney David N. Kelley informed Sullivan and his attorneys that they plan to use evidence of other alleged accounting irregularities to bolster their case. Although the letter was not made public, its contents were discussed in a hearing Tuesday. Sullivan will not face additional charges based on the new allegations, but the prosecution wants to use them to show that the line-cost decisions were part of a larger scheme to bolster the firm's bottom line.

Sullivan's lead defense attorney, Irvin B. Nathan, asked U.S. District Judge Barbara S. Jones on Tuesday to delay the Feb. 2 trial.

"We have gone through literally millions of documents and accounting documents looking at the issues that are in the documents. Now we have 13 other issues. It is not fair and I think we need to modify the trial date," Nathan said, according to a transcript of the hearing.

Jones asked Assistant U.S. Attorney David Anders to spell out the accounting issues in more detail by Jan. 5 and said she would make a decision after the defense has a chance to respond.

Neither side would discuss the alleged irregularities or otherwise comment after the hearing.

Sullivan's legal team filed a written motion alleging that prosecutors abused the grand jury process and violated Sullivan's right to a fair trial. The filing alleges the charges against Sullivan were rushed and politically motivated because the Bush administration felt it needed to look tough on corporate crime.

The defense team alleged that prosecutors cut corners by calling only a few witnesses before the grand jury and that they failed to screen out jurors who suffered financial losses from the collapse of WorldCom and other corporate scandals. Sullivan was indicted two months after WorldCom announced it was restating its results.

Also Tuesday, an Oklahoma court judge postponed a pretrial hearing in Sullivan's state fraud case until May 17, the Associated Press reported. Sullivan's lawyers had argued that it would hurt his defense to hold a preliminary hearing in Oklahoma on Jan. 26, just days before the federal case is scheduled to start.


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