Worldcom Restatement May Top $9BNov 6, 2002 | USA Today
WorldCom said Tuesday that its financial restatement may eclipse $9 billion nearly $2 billion more than already disclosed and that it is in settlement talks with the government on its fraud case against the company.
The Securities and Exchange Commission, meanwhile, added two new fraud charges Tuesday. It claims WorldCom misstated its finances and misled investors going back to 1999, which is a longer period than the SEC initially included in its complaint.
WorldCom, owner of MCI, says the restatements will have ''no impact'' on its ability to serve its 20 million customers or on its plans to emerge from bankruptcy-court protection next year. It said several months ago that restatements would likely grow and go back to 1999. There may be even more, people familiar with the matter say.
The SEC's broadened attack comes as the two sides near settlement, those people say. The SEC charges that WorldCom, which has admitted accounting misdeeds, committed fraud by manipulating financial records. One SEC official cautioned against expecting a fast settlement. ''The commission has no intention of seeking dismissal of its fraud charges or any of its other claims against WorldCom,'' said Peter Bresnan, the SEC's deputy chief litigation counsel. A deal could impose a multimillion-dollar fine and bar WorldCom from violating securities laws, legal experts say.
The potential settlement just five months after the SEC filed charges could lessen the threat of further federal legal action and aid the recovery of the struggling No. 2 long-distance provider. ''A quick settlement allows WorldCom to get on with business,'' says attorney Kenneth Vianale of Milberg Weiss Bershad Hynes & Lerach, which has a pending shareholder lawsuit against WorldCom.
Any deal with WorldCom will be closely scrutinized. SEC Chairman Harvey Pitt stepped down late Tuesday after mounting criticism for his handling of the appointment of a chairman for a new auditing oversight board. Pitt had pointed to rapid action on WorldCom as evidence of the SEC's effectiveness.
WorldCom, which in July filed the largest bankruptcy case ever, had previously admitted in two separate instances $7.2 billion in accounting misdeeds. The new revelations deal with billing errors, asset write-downs and accounting for foreign subsidiaries.
The Justice Department continues its inquiry. It has brought charges against several former employees.