WorldCom Exec Pleads Guilty
Former Controller David Myers Expected To Cooperate With Investigation Into Bankrupt Telecom.Sep 26, 2002 | CNN/Money
The former controller of WorldCom Inc. pleaded guilty Thursday to federal criminal charges in connection with a $7 billion accounting scandal at the bankrupt telecommunications company.
The plea deal with David Myers, 44, may help prosecutors go after Scott Sullivan, the ex-WorldCom CFO whose plea of not guilty last month paved the way for a future trial.
Myers pleaded guilty in New York to one count each of conspiracy to commit securities fraud, securities fraud, and making false filings with Securities and Exchange Commission. He faces sentencing Dec. 26.
Myers told U.S. District Judge Richard Casey that, on the instruction of senior management, he falsified WordCom's financial statements between October, 2000, and June, 2002, by hiding costs to make the company appear more healthy.
Richard Janis, Myers' lawyer, said, "Myers was a reluctant participant in the events that have lead us here," and his client had expressed discomfort and displeasure at the actions being undertaken at WorldCom.
But "he recognized as a corporate officer, those facts do not relieve him of his own responsibility in this matter," he added.
Janis also said his client has agreed to enter a guilty plea in Mississippi as early as next week to one count of violating Mississippi law, and Myers will continue to cooperate with government investigators.
In addition, the SEC filed a civil fraud suit against Myers, but Janis said he has been actively in discussions with the government agency and expects to resolve the case in the near future.
Thursday's guilty plea by Myers is the first in the government's probe of the WorldCom scandal. The controller resigned from WorldCom on June 25, the same day the company said it overstated five quarters of financial results by hiding $3.8 billion in costs. WorldCom went on to file the biggest bankruptcy in history in July. Later, the Clinton, Miss.-based long-distance and Internet provider expanded its financial restatements to about $7 billion.
The accounting scandal helped sink the U.S. stock market by shaking investor confidence in corporate practices.
Myers and Sullivan were arrested in August. Myers has been free on $2 million bond; Sullivan signed a $10 million bond.
Prosecutors say they directed employees to falsify balance sheets to hide more than $3.8 billion in expenses, causing WorldCom earnings to be overstated by an even greater amount.
The deception enabled WorldCom to report a profit when it was actually losing money, according to regulators.
The Wall Street Journal reported Thursday that two other former WorldCom accounting executives identified as unindicted co-conspirators, Betty Vinson and Troy Normand, have been negotiating with the government over the past few weeks and are expected to plead guilty Oct. 10.
Each of the securities fraud counts that Myers pled guilty to carries up to five years in prison and fines of up to $250,000. The false statement count carries as much as 10 years of jail time and $1 million in fines.