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WorldCom Staff Told Not To Talk To Auditor, E-Mails Show

Aug 27, 2002 | The Washington Post

WorldCom Inc.'s former controller warned employees who questioned the company's accounting practices not to discuss their concerns with the firm's outside auditors, according to a new batch of corporate e-mails released by congressional investigators yesterday.

David F. Myers, one of two top finance executives who were fired as a result of the company's accounting scandal, was furious that finance officials in the company's European operations had met with Arthur Andersen LLP auditors to discuss how to properly depreciate some of the company's assets.

"Do not have any more meetings with AA for any reason," Myers wrote in an e-mail on Jan. 22 of this year to Steven Brabbs, a top international finance official based in Britain. "I do not want to hear an excuse," he continued, "just stop. . . . Don't make me ask you again."

The e-mails provide further insight into an atmosphere of tight-fisted control over WorldCom's finances by Myers at a time when the company was improperly booking expenses in the United States, said Peggy Peterson, a spokeswoman for the House Financial Services Committee, which released the messages.

The e-mails do not relate directly to the improper booking of $3.9 billion in operating expenses as capital expenses, which ultimately led the Securities and Exchange Commission to charge WorldCom with defrauding investors. That bookkeeping allowed the company to report a profit instead of a loss because capital expenses are spread out over long periods.

The e-mail discussion was about how much the company could write off the "impairment" of assets in the European division. It is not clear from the e-mails how the issue was resolved.

Earlier the same January day, Brabbs was warned not to pursue the issue with Arthur Andersen auditors by Mark Willson, who worked for the deputy of WorldCom's chief financial officer, Scott D. Sullivan. Sullivan was fired along with Myers.

"Issues such as . . . asset writedown will not be concluded on by UK AA," Willson wrote to Brabbs.

Willson also sent a copy of the note to Myers to show what action he had taken. Myers shot back: "Not that I was looking for another reason to have him executed."

Brabbs, in fact, had challenged financial practices at WorldCom's Mississippi headquarters before.

One day after WorldCom announced the scandal and fired Myers and Sullivan, Brabbs sent a lengthy letter to its auditors decribing another instance in which he resisted making adjustments to the international division's books in 2000, despite pressure from Myers.

Brabbs said that journal entries made at Sullivan's direction were improper and amounted to a $33.6 million understatement of costs, and that he had raised the issue with Arthur Andersen. Myers was angry then that Brabbs had gone to the auditing firm, Brabbs wrote.

Brad Burns, a spokesman for WorldCom, said, "We're cooperating with all investigations and will continue to do so until we gain full resolution."

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