Federal prosecutors said today they expect to file new charges and may name new defendants in their investigation into possible accounting fraud at WorldCom Inc.
“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,” assistant U.S. attorney David Anders told U.S District Court Judge Barbara Jones this morning at an arraignment for former WorldCom chief financial officer Scott Sullivan and accounting executive Buford Yates Jr.
Both men, indicted by a grand jury last week on securities fraud charges, pleaded not guilty today. Sullivan remains free on a $10 million bond while Yates was released today on a $500,000 bond. Yates’ attorney, David Schertler, told the judge he would file a motion within 30 days asking for a change of venue to federal court in Mississippi, where WorldCom is based and where Yates lives.
WorldCom filed the largest bankruptcy protection case in U.S history in July after disclosing it had falsely booked $3.9 billion in expenses over the past five quarters. Earlier this month, the company reported that it had mishandled $3.8 billion more, in the form of reserve accounts designed to cushion it from losses.
WorldCom is the parent company of Arlington, Va., long-distance provider MCI and UUNet, the Ashburn, Va., Internet service provider that carries a big chunk of the world’s Internet traffic.
Prosecutors allege that Sullivan and Yates directed accounting department officials Betty Vinson and Troy Normand to carry out the biggest corporate fraud in U.S. history. Vinson and Normand were fired last Wednesday.
Former WorldCom controller David F. Myers surrendered to FBI agents early last month along with Sullivan but has not been indicted, a fact legal experts say indicates prosecutors are satisfied with the information he is providing them about the case.
“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 government’s 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 suggest that Myers and Vinson may plead guilty as part of a cooperation deal with the government. Such a deal could increase pressure on Sullivan to cooperate with prosecutors and describe any role former WorldCom chief executive Bernard J. Ebbers may have played in the alleged accounting fraud. Ebbers, through his attorney, has denied any knowledge of accounting irregularities.