Two top WorldCom officials apparently were told of potential accounting problems in March, according to an e-mail released Tuesday by a House committee investigating multibillion-dollar errors in the telecom giant’s books.
The March 18 message to WorldCom founder and former CEO Bernard Ebbers and ex-chief financial officer Scott Sullivan from another official cites “questions” about accounting issues related to preparation of the company’s annual financial report.
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 — about a month after disclosing it had falsely inflated profits by $3.9 billion by concealing expenses.
The Justice Department and the Securities and Exchange Commission are investigating the accounting abuses. Sullivan was indicted Aug. 28 as federal prosecutors accused him of overseeing a long-running conspiracy to hide the expenses. Sullivan, who is free on $10 million bail, could get up to 65 years in prison if convicted on charges of securities fraud, conspiracy and filing false statements with the SEC.
Sullivan’s attorney has said his client was a victim of “a rush to judgment.”
Ebbers’ lawyers have said he had no knowledge of the allegedly fraudulent accounting decisions.
Ebbers received $400 million in loans from WorldCom and a $1.5 million annual severance payment for life.
Both Ebbers and Sullivan invoked their Fifth Amendment privilege and refused to answer lawmakers’ questions at a July 8 hearing by the House Financial Services Committee.
Other e-mails in the group provided to the panel by WorldCom and released Tuesday show that Ebbers and Sullivan appeared to have gotten advance notice in March that investment firm Salomon Smith Barney was removing WorldCom from its list of recommended stocks.
Another e-mail indicates that Sullivan sought in April to brush off questions about WorldCom’s finances from the credit-rating agency Moody’s Investors Service.
The committee is investigating whether Salomon Smith Barney, which is the investment division of banking giant Citigroup, and Salomon telecom industry analyst Jack Grubman gave WorldCom special access to shares of hot new stock offerings as an inducement for investment-banking business. The panel recently issued a subpoena for documents to Citigroup.
Documents released by the panel last week show that Ebbers amassed more than $11 million on shares of offerings made available to him by Salomon Smith Barney.
Jane Sherburne, Citigroup’s deputy general counsel, has denied the shares were offered as a lure for business.
WorldCom had requested that the e-mails be given confidential treatment by the committee.
Company spokeswoman Julie Moore declined specific comment Tuesday, saying, “We are fully cooperating with all investigative bodies and providing them with information upon request.”
Salomon spokeswoman Arda Nazerian did the same. “We continue to cooperate with the committee’s inquiry,” she said.
Ebbers’ attorney didn’t immediately return a telephone call seeking comment Tuesday night. Sullivan’s lawyers couldn’t be reached.