Federal prosecutors said Wednesday they will level new charges and may indict new defendants in the burgeoning WorldCom accounting investigation.
Assistant U.S. Attorney David Anders told U.S. District Court Judge Barbara Jones that he intends to file a superseding indictment in the case that has already branded five WorldCom executives as co-conspirators in the largest accounting scandal in U.S. history.
“The government is continuing its investigation and we do plan to supersede at some point, to add charges to the same scheme and to potentially add defendants,” Anders said after Jones asked him if he was prepared to set a trial date.
Anders spoke to the judge during the arraignment of former WorldCom chief financial officer Scott Sullivan and accounting executive Buford Yates Jr. Both men pleaded innocent to securities fraud charges.
Dec. 9 was set for a pretrial hearing.
The prosecutor said he was preparing to turn over to defense lawyers 100 to 150 boxes of evidence seized in the case.
Sullivan remains free on $10 million bail while Yates — who was making his first court appearance — was released on a $500,000 bond.
Yates’ attorney David Schertler said he will soon file papers seeking to have his client’s trial moved out of New York. If the request is granted, that could lead to a separate trial for Yates, 46, who lives in Brandon, Miss.
Outside court, Schertler declined to comment further on the case.
Sullivan and his lawyer ducked into a waiting black Cadillac without speaking to a crush of reporters.
WorldCom, which owns the nation’s No. 2 long-distance telephone company MCI, became the biggest corporate bankruptcy in U.S. history on July 21.
Sullivan and former comptroller David Myers are charged with directing other WorldCom employees to hide $3.8 billion in expenses, allowing the company to misstate earnings by an even greater amount.
At their orders, accounting executives Yates, Betty Vinson and Troy Normand helped carry out the mammoth corporate accounting fraud, prosecutors charge.
“Sullivan, Yates, and their co-conspirators were able to assure that WorldCom’s reported earnings exceeded its actual earnings for the period from October 2000 through April 2002 by approximately $5 billion,” the indictment said. “As Sullivan, Myers, Yates, Vinson, and Normand well knew, there was no justification in fact or under generally accepted accounting principles for these entries.”
Court papers filed last week indicate Myers, Vinson and Normand are on the verge of pleading guilty as part of cooperation deals, which greatly increases the pressure on Sullivan to strike a deal with prosecutors and tell them what, if anything, ex-CEO Bernard Ebbers knew about the alleged accounting crimes.
Ebbers’ lawyer has said he knew nothing about any misreporting, while Sullivan’s lawyer Irv Nathan has said his client was a victim of a “rush to judgment.”