Sen. Chuck Schumer has told new Securities and Exchange Commission Chairman William H. Donaldson not to let WorldCom get away with a “slap on the wrist” for its massive accounting fraud.
Calling WorldCom one of the worst of the “bad apples” that have recently stunk up Wall Street, Schumer argued in a letter dated April 9 that, “Leniency from the SEC and other federal enforcement officials in the face of this type of pervasive conduct will not provide the strong message necessary to deter future corporate fraud.”
WorldCom, the subject of SEC and federal investigations, filed for bankruptcy protection last summer, after overstating expenses by more than $9 billion in one of the largest corporate scandals ever committed.
Schumer, in the letter, estimates that the losses suffered by New York public funds alone total nearly $600 million.
Schumer’s comments come as prosecutors intensified the pressure on Scott Sullivan, the former WorldCom chief financial officer who is to stand trial in September on securities fraud charges.
On Wednesday, prosecutors hit Sullivan with four new charges, including bank fraud and making false statements, which carry a maximum penalty of a 120-year prison sentence.
In blasting the small fine proposed in the SEC settlement, Schumer cited former Attorney General Richard Thornburgh, a court-appointed examiner in the WorldCom bankruptcy, who described the company’s behavior as “a concerted program of manipulation.”
“It has come to my attention that the SEC is poised to enter a settlement with WorldCom that will end the Commission’s investigation and result in only a relatively small civil fine,” Schumer wrote.
He urged the commission to “make sure that any settlement reflects the gravity of the misconduct at issue.”