More charges and defendants could be added to the WorldCom accounting probe, prosecutors said Wednesday, as former WorldCom executives Scott Sullivan and Buford Yates pleaded not guilty to fraud and conspiracy charges.
Sullivan, WorldCom’s fired CFO, and former accounting director Yates were charged last month with conspiring to falsely inflate WorldCom’s profits by $5 billion from late 2000 to early 2002.
Sullivan has been the main target. Prosecutors claim he hid expenses to keep earnings in line with Wall Street expectations. He, legal experts say, could help prosecutors go for WorldCom’s ex-CEO, Bernie Ebbers, who, through his attorney, has denied wrongdoing.
Former WorldCom controller David Myers, arrested with Sullivan last month, continues to discuss a plea deal with prosecutors in exchange for his cooperation. Legal experts say he is in the best position to help the government prosecute Sullivan. Myers’ attorney didn’t return phone calls.
Accounting employees Troy Normand and Betty Vinson are expected to plead guilty to lesser charges in exchange for their help. Their attorney couldn’t be reached.
More players are possible. Assistant U.S. Attorney David Anders said Wednesday that prosecutors might add new charges and defendants to the indictment.
TV cameras and photographers greeted Sullivan when he arrived a few minutes before his arraignment. He exchanged words with his attorney and his wife, Carla, then sat at the defense table, where he rested his elbows like a student waiting for class to begin. As they left, the couple ran the gantlet of reporters to a car, while some bystanders taunted Sullivan. His attorney, Irv Nathan of Arnold & Porter, cautioned reporters against a ”rush to judgment.”
Yates, who arrived early and didn’t leave until long after the arraignment, has indicated in WorldCom documents that he disagreed with the accounting methods that allowed WorldCom to inflate earnings by $3.9 billion. That method counted some operating expenses as capital expenses, which allowed them to be written off over time. His attorney, David Schertler, couldn’t be reached.
WorldCom, the USA’s No. 2 long-distance phone company, sought bankruptcy protection in July. It has disclosed more than $7 billion in improper accounting. It faces fraud charges from the Securities and Exchange Commission and a congressional inquiry. Also Wednesday:
* A bankruptcy court approved a deal under which WorldCom will pay Verizon Communications $34.5 million in debt and extend a billing agreement through 2003. Verizon connects calls for millions of WorldCom customers.
* WorldCom asked the court’s permission to pay $36 million in severance to 4,100 workers laid off before it filed Chapter 11.