Buford Yates Jr., former WorldCom director of general accounting, pleaded guilty to conspiracy and securities fraud Monday, saying he knowingly inflated WorldCom’s net revenue by $800 million, actions his lawyer said were approved of by “the highest levels of WorldCom management.”
Yates, 46, a portly man with a goatee and graying hair, refused to identify who had directed him to file false reports with the Securities and Exchange Commission for the last three quarters of 2001, but indicated in his plea that he had expressed his concerns to his supervisors.
He said he and other employees became aware in October 2000, following the firm’s third quarter, that WorldCom’s expenses were higher than they had been in previous quarters and higher than securities analysts had predicted. Yates said unnamed supervisors directed him to make adjustments that reduced the firm’s reported expenses and increased its net revenue.
“I realized that the accounting department at WorldCom was not implementing any of the changes that ordinarily would be made with any major change in accounting practices,” Yates told U.S. Magistrate Judge Andrew Peck, speaking quickly and in a voice that was barely audible.
“I came to believe that the adjustments I was being directed to make in WorldCom’s financial statements had no justification and contravened generally accepted accounting principles,” he said. “I concluded that the purpose of these adjustments was to incorrectly inflate WorldCom’s reported earnings in order to meet the expectations of securities’ analysts and mislead the investing public of the company’s financial condition.”
Yates, of Brandon, Miss., remains free on $500,000 bond. He faces up to five years in prison for the conspiracy charge and least at least a $250,000 fine and faces up to 10 years in prison and a $1 million fine for the securities fraud when he is sentenced Jan. 9 by U.S. District Court Judge Barbara Jones.
But his lawyer suggested that his term could be reduced based on the level of cooperation he gives the office of Manhattan U.S. Attorney James Comey by testifying against other WorldCom executives who directed what has become the largest corporate accounting fraud in the nation’s history.
During his plea, Yates did not name which supervisors had directed him to carry out such a plan. His lawyers also refused to identify under whose orders Yates had acted and declined to confirm or deny if it was former chief executive Bernard Ebbers or former chief financial officer Scott Sullivan.