Two former WorldCom Inc. executives surrendered Thursday to face federal charges related to a multibillion accounting fraud at the bankrupt telecommunications giant.
Former chief financial officer Scott Sullivan and former controller David Myers turned themselves in to the FBI at 7 a.m. at an undisclosed location in Manhattan.
Federal agents led the pair out of New York’s FBI headquarters in handcuffs at midmorning, enroute to court. The men, both wearing dark suits, did not speak to a swarm of reporters; two passersby clapped.
A seven-count complaint was unsealed in federal court Thursday, charging them with securities fraud and conspiracy. The complaint alleges that Sullivan directed Myers to hide over $3 billion in expenses by dispersing the debts throughout the company’s capital expense accounts.
Sullivan and Myers were dismissed from WorldCom in June after the company admitted it falsely accounted for $3.8 billion in expenses, allowing executives to continue reporting profits when the company was actually losing money.
The charges increase pressure on Myers and Sullivan to tell investigators what they know about their former boss, former chief executive Bernard Ebbers, who also is being investigated by prosecutors. Ebbers resigned two months before the company disclosed the accounting fraud.
The Securities and Exchange Commission filed civil fraud charges against WorldCom, citing “accounting improprieties of unprecedented magnitude.”
The Justice Department has also considered taking the more drastic step of filing criminal charges against WorldCom as a corporation. A conviction of the long-distance phone company could drive it out of business.
WorldCom, which owns MCI, the nation’s second-largest long distance carrier, filed for bankruptcy under Chapter 11 on July 21, the largest such filing in U.S. history.
U.S. Bankruptcy Judge Arthur Gonzalez approved $2 billion in financing to keep WorldCom operating as it reorganizes its finances. He also granted the Justice Department’s request for an independent examiner to ensure an honest accounting of the company’s value and investigate for mismanagement, irregularities and fraud.