Two former WorldCom accountants are set to admit guilt, possibly as early as today, in one of the biggest accounting scandals ever, people familiar with the case say.
Troy Normand and Betty Vinson are expected to plead guilty to fraud and conspiracy charges in federal court in Manhattan.
Former accounting director Buford Yates pleaded guilty Monday to similar charges that carry a maximum sentence of 15 years and fines of at least $1.25 million. Former controller David Myers pleaded guilty last month.
Joe Hollomon, an attorney for Vinson and Normand, did not respond to a request for comment. The U.S. Attorney’s office in New York declined comment.
Prosecutors say that all four former WorldCom employees participated in a scheme that allowed the company to hide $5 billion in expenses from late 2000 into 2002. The goal: to meet Wall Street earnings expectations when WorldCom’s growth slowed.
Prosecutors have accused former chief financial officer Scott Sullivan of orchestrating the scheme. Sullivan, who has pleaded innocent, instructed Myers, Yates, Normand and Vinson to ”book fraudulent entries” in WorldCom’s ledger to artificially inflate earnings, prosecutors say.
Prosecutors hope the former employees, who can get lighter sentences in return for their cooperation, help the cases against Sullivan and other top brass, possibly including former CEO Bernie Ebbers. Ebbers has not been charged and says he’s innocent.
Guilty pleas from Vinson and Normand, while expected, show how deep prosecutors will dig into the corporate hierarchy to nail white-collar criminals who helped destroy investor confidence.
Some legal experts say the hard-line approach is overkill.
”This is like taking a sledgehammer to a thumbtack,” says Jacob Frenkel, a former prosecutor and an attorney at Smith Gambrell & Russell. ”The prosecution of marginal players may have a feel-good effect, but that may be abused as you get further down the chain.”
Normand told WorldCom auditors that he considered resigning because of ”aggressive accounting” for expenses at the company. But he kept quiet because he feared for his job and family.
Normand said Sullivan ”assured him that everything would be OK.” Vinson told internal auditors she made the accounting entries but didn’t know what they were.
The WorldCom case could raise the stakes for other low- and midlevel employees who suspect wrongdoing but do nothing.
”They will face potential jail time, even if they were just following orders and did not personally profit,” says Robert Mintz, a former prosecutor now with McCarter & English. ”This is a much harsher approach than the government has traditionally taken.”