A former WorldCom Inc. executive has pleaded guilty to conspiracy and securities fraud, the first admission of guilt in the largest corporate accounting scandal in U.S. history.
David Myers, 44, agreed Thursday to cooperate with authorities against his former bosses and to plead guilty as early as next week to an additional charge stemming from the multibillion dollar swindle, his lawyer said.
Prosecutors say Myers and Scott Sullivan, the former chief financial officer at WorldCom, directed employees to falsify balance sheets to hide more than $3.8 billion in expenses. The deception enabled WorldCom to report a profit when it was actually losing money, according to regulators.
“I was instructed on a quarterly basis by senior management to ensure that entries were made to falsify WorldCom’s books to reduce WorldCom’s reported actual costs and therefore to increase WorldCom’s reported earnings,” Myers told the court.
U.S. District Court Judge Richard Casey asked the defendant if he had committed the three crimes spelled out by prosecutors: conspiracy, securities fraud, and making false filings to the Securities and Exchange Commission.
“Yes, sir, I did,” Myers answered.
Myers faces up to 10 years on the most serious charge of filing false reports with the SEC. Myers is also negotiating with the SEC to resolve civil charges filed Thursday, his attorney said.
The agency is seeking civil money penalties, repayment of allegedly ill-gotten gains and an order barring Myers from serving as an officer or director of a publicly traded company.
Outside court, attorney Richard Janis said his client was a reluctant participant who had “expressed his discomfort and displeasure with the actions being undertaken by WorldCom.”
WorldCom, which owns the nation’s No. 2 long-distance telephone company MCI, became the biggest corporate bankruptcy in U.S. history in July. The company has since revised the amount of accounting improprieties up to $7.1 billion, and recent reports said the final total may reach $9 billion.
The Justice Department has considered taking the more drastic step of charging WorldCom as a corporation. A conviction of the long-distance phone company could drive it out of business.
U.S. Bankruptcy Judge Arthur Gonzalez has 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.
The criminal case is the latest in a series of corporate accounting practices that have shaken investors. Accusations of shading financial dealings have recently hit other companies, including Enron Corp., Homestore.com, Tyco International Ltd., Global Crossing, Adelphia Communications and ImClone Systems.