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WorldCom's Yates Pleads Guilty To Fraud

Oct 7, 2002 |

Buford Yates, the former director of general accounting at WorldCom, on Monday pleaded guilty to securities fraud in a Manhattan court, opening the door for co-operation with federal prosecutors.

In July Mr Yates and Scott Sullivan, WorldCom's former chief financial officer, pleaded not guilty to charges of conspiring to hide about $7.2bn of operating expenses.

However, Mr Yates on Monday pleaded guilty to one count of conspiracy to commit securities fraud and one count of committing securities fraud. He is now expected to co-operate with federal prosecutors, who have focused their case on Mr Sullivan.

The 27-page complaint against Mr Yates alleged that he and Mr Sullivan engaged in a scheme to inflate the second-largest US long-distance carrier's earnings from about 2001 to about June 2002. The revelation of the alleged fraud led to WorldCom's collapse in the largest bankruptcy in US corporate history.

Conspiracy to commit securities fraud carries a maximum sentence of five years in prison and a $250,000 fine. Securities fraud carries a maximum 10-year prison sentence and a $1m fine.

Mr Yates is the second senior WorldCom executive to plead guilty in a New York courtroom in a month. David Myers, the company's former financial controller, last month pleaded guilty to violating numerous provisions of federal securities laws and aiding and abetting violations of reporting and bookkeeping rules.

The co-operation of both Mr Yates and Mr Myers with federal prosecutors could lead to a case against Bernie Ebbers, WorldCom's founder and former chief executive officer.

Clinton, Mississippi-based WorldCom filed for chapter 11 bankruptcy protection in July, listing $107bn in assets and $41bn in debt.

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