Contact Us

PW Case Review Form
*    Denotes required field.

   * First Name 

   * Last Name 

   * Email 


   * Please describe your case:

What injury have you suffered?

For verification purposes, please answer the below question:

No Yes, I agree to the Parker Waichman LLP disclaimers. Click here to review.

Yes, I would like to receive the Parker Waichman LLP monthly newsletter, InjuryAlert.

please do not fill out the field below.

WorldCom Heads Cashed In As Fraud Occurred

Aug 9, 2002 | FT.Com

WorldCom executives earned $104m in salaries, bonuses and share sales even as the bankrupt telecoms group was using accounting tricks to exaggerate its earnings by billions of dollars.

The payments, half of which were in the form of profits on the sale of share options in 1999, have renewed relevance after WorldCom revealed a further $3.3bn of improper accounting stretching back as early as 1999.

The disclosure takes the total accounting fraud at WorldCom to $7.6bn in just over three years, and raises the prospect that investigators may uncover further manipulation of profits for 1999 and earlier years.

The revelation that the accounting fraud began before 2001 is likely to increase the pressure from creditors for the replacement of John Sidgmore, the long-serving WorldCom manager who took over from Bernie Ebbers as the group's chief executive in April.

Mr Sidgmore had previously distanced himself from the fraud by pointing to his decision to take a back-seat role at the company in mid-2000.

The new disclosures will strengthen the federal government's fraud case against Scott Sullivan, the former chief financial officer, who was arrested last week. They may also help investigators to mount a case against Mr Ebbers, who has not been charged.

On Thursday, Mr Ebbers' lawyer, Reed Weingarten, insisted his client was not involved in the fraud. "The chief executive of a company with 60,000 employees can't know about every decision that is made," he said on CNBC, the business television channel.

"Accounting decisions are arcane. They're mysterious for people who are not trained in the science," Mr Weingarten added.

Analysts said that the new revelations posed a further question about WorldCom's profitability in 1999. The reductions that were announced yesterday cut the company's pretax profit for 2000 from $4.97bn to $1.7bn.

But the adjustment to 1999 profits reduced pre-tax profits for that year to $4.4bn, implying that either WorldCom's actual profits fell by almost two-thirds between 1999 and 2000, or that the company has yet to uncover further accounting tricks in 1999.

Jim Andrew, a telecoms expert at Adventis, the Boston-based consulting group, said: "What is clear is that WorldCom wasn't nearly as profitable as they were telling the world. They never made the effort to integrate their acquisitions, so they ended up with hidden costs."

Related articles
Parker Waichman Accolades And Reviews Best Lawyers Find Us On Avvo