WorldCom Exec Hoped to Avoid ProbeJul 16, 2002 | AP
A top officer at Worldcom Inc. acknowledged to insiders last month that the company was violating accounting standards but indicated that Worldcom might fail if it reported its financial condition honestly, according to internal documents turned over to Congress.
The newest documents also included a proposal in March by former Chief Executive Bernard Ebbers to cut funding in half for audits such as the one that ultimately uncovered the company's $3.8 billion in accounting irregularities.
The documents were among boxes of materials handed over to the House Energy and Commerce Committee as part of a broad investigation into corporate malfeasance.
Among the most sensational passages disclosed Monday were notes from a June 17 meeting among David Myers, WorldCom's comptroller, and Cynthia Cooper, an internal auditor. Responding to questions about the company's figures, Myers acknowledged that "there were no specific accounting pronouncements supporting these entries."
Asked how Myers might explain such entries to the Securities and Exchange Commission ( news - web sites), "David stated he had hoped it would not have to be explained."
The notes from the meeting were Cooper's, according to Rep. Billy Tauzin, R-La., the committee chairman. It took place roughly one week before WorldCom's public disclosures about its accounting problems.
In a second meeting, just hours later, Myers told Cooper that WorldCom "should probably not have" classified some business expenses to make it appear the company was more profitable, according to Cooper's notes. But since WorldCom had started the practice, during its second fiscal quarter in 2001, Myers told Cooper that "it was difficult to stop."
Other documents released Monday indicated that WorldCom executives considered these accounting ploys as early as July 2000. But a July 25 e-mail to Myers and another WorldCom official determined there was "no support within the current accounting guidelines that would allow for this accounting treatment."
By June 2002, when Myers met with Cooper, the faltering economy apparently persuaded some executives to reconsider. Myers warned Cooper that without the accounting changes, "the company might as well shut its doors."
Myers, who was the only person apart from chief financial officer Scott Sullivan to have direct control over WorldCom's books, resigned to avoid being fired by the company when the board learned of the massive misstatement. He could not be reached immediately for comment. Sullivan was fired last month.
In unusually harsh language Monday, Tauzin and other lawmakers described former top executives at WorldCom as "common thieves" and "common criminals."
Rep. James Greenwood, R-Pa., chairman of the subcommittee on oversight and investigations, said former WorldCom executives made "the same decision any thief makes."
Amid recent scandals involving Enron Corp. and others, "this is the clearest and most definable violation of accounting standards we have seen," Tauzin said. "This was as pure a case of theft, of insider stealing, as we have seen."
WorldCom spokeswoman Julie Moore said WorldCom turned over a variety of documents to investigators.
"It's now in their hands to do with it as they see fit," Moore said. "WorldCom, more than anybody, wants to get to the bottom of this."
Clinton, Miss.-based WorldCom, whose interests include the nation's No. 2 long-distance telephone company, MCI, is the latest major corporation to face allegations of executive wrongdoing and accounting dodges.