The former controller of WorldCom Inc. tried to prevent a subordinate from raising accounting concerns with the embattled telecommunications firm’s auditors.
A BATCH OF E-MAILS released by congressional investigators probing WorldCom shows former controller David Myers ordering Steven Brabbs, an executive in the company’s London offices who was raising questions about the company’s accounting methods, to have no further contact with Arthur Andersen LLP.
“Do not have anymore meetings with AA for any reason,” Mr. Myers wrote in an e-mail to Mr. Brabbs on Jan. 22, referring to Andersen. He warned Mr. Brabbs not to offer him any more excuses about his communication with Andersen and then sent Mr. Brabbs a blunt warning: “Don’t make me ask you again.”
The e-mails could potentially ratchet up the legal woes facing Mr. Myers, who resigned from WorldCom the day it announced $3.85 billion in accounting irregularities. The disclosure sent the value of the company’s stock plummeting and led it to seek Chapter 11 bankruptcy-court protection, the largest such filing in U.S. history. The company has since expanded its planned financial restatement to $7.2 billion after finding more improperly booked items.
Mr. Myers, 44 years old, was arrested last month and charged with securities fraud, conspiracy and other related charges. Mr. Myers, who has been released on $2 million bail, is negotiating a possible plea that could result in his cooperation in the investigation, say people familiar with the matter. Mr. Myers is said to be in advanced talks with prosecutors, these people say, but the e-mail messages could complicate the situation by raising new questions about his role.
“Those sorts of documents in writing give signposts along the way to a person’s intent,” said former federal prosecutor Stephen M. Ryan, who isn’t involved in the WorldCom case.
In the case of Mr. Myers, the e-mails could potentially be viewed as proof that the controller was trying to keep Arthur Andersen from evaluating the company’s accounting treatment, Mr. Ryan said, though he added that Mr. Myers may simply have been trying to keep information flowing in an orderly fashion.
Congressional officials, for their part, said they were confident the e-mails had no benign explanation. “It was an attempt to intimidate Mr. Brabbs into shutting up,” maintains Peggy Petersen, a spokeswoman for House Financial Services Committee Chairman Michael Oxley (R., Ohio), whose committee released the e-mails.
An attorney for Mr. Myers declined to comment. WorldCom spokesman Brad Burns said the company is “cooperating with all of the investigations and will continue to do until there’s a full resolution of them.” Mr. Brabbs, who still works for WorldCom, couldn’t be reached to comment.
The e-mails paint a picture of the pressures and conflicts building within WorldCom as senior executives began to notice that something was seriously wrong with the company’s books.
In March 2000, Mr. Brabbs, whose title at that time was director, International Finance & Control, noticed a U.S. executive had reduced his division’s expense figures by $33.6 million, making the division’s numbers look better than they actually were, according to a memo that he later sent in an e-mail to a colleague.
When Mr. Brabbs asked his counterparts in the U.S. about the change, he was told it was made because of a directive from WorldCom’s then-Chief Financial Officer Scott Sullivan, according to the same memo. A month later, Mr. Brabbs co-wrote a letter to Arthur Andersen and to WorldCom’s senior financial management asking them to make sure the change had been accounted for appropriately. The other authors of the letter haven’t been identified.
Shortly after writing the letter, Mr. Brabbs said in his memo, he received an e-mail from Mr. Myers “indicating he was not pleased this matter had been raised with Andersen without his knowledge.”
Mr. Brabbs ultimately agreed to create a “management company” that would account for the change. But when Mr. Brabbs reached out to Andersen again earlier this year, Mr. Myers was apparently furious.
“Not that I was looking for another reason to have him executed,” Mr. Myers fumed in an e-mail to a colleague Jan. 22.