Two former WorldCom mid-level managers on Thursday pleaded guilty to securities and conspiracy fraud for their roles in the company’s $7.2bn accounting fraud that bankrupted the company.
Betty Vinson and Troy Normand pleaded guilty to one count of securities fraud and one count of conspiracy to commit securities fraud in Manhattan federal court. Their plea deals include an agreement to cooperate with prosecutors.
This brings to four the number of WorldCom executives who have struck deals with the Justice Department in its continuing investigation into the collapsed telecommunications company.
On Monday Buford Yates, WorldCom’s director of general accounting, pleaded guilty to falsifying financial records at Mr Sullivan’s behest. Both Ms Vinson and Mr Normand objected to the changes in WorldCom’s accounting that led to the scandal, according to lawyers close to the case.
David Myers, WorldCom’s former controller, also pleaded guilty last month to similar charges, saying he had falsified profits at the request of superiors.
All four plea bargains raise the legal heat on Mr Sullivan, who pleaded not guilty last month to charges that he falsified WorldCom’s books, after talks with prosecutors over a plea deal broke down. Mr Sullivan has maintained the changes he made in WorldCom’s accounting, where expenses were shifted to capital investments, were legitimate under US accounting rules.
Ms Vinson and Mr Normand’s role emerged in August, when a federal grand jury handed up the indictment against Mr Sullivan. The two were listed as unindicted co-conspirators for allegedly reclassifying WorldCom’s expenses to help inflate its reported earnings by about $5bn, starting in late 2000. They reported directly to Mr Yates.
The two were widely believed to be co-operating with the government at the time of the indictment because they were not formally charged.
Jacob Frenkel, a former federal prosecutor and head of white-collar crime at Smith, Gambrell & Russell, said forcing such low-level officials to plead guilty to criminal charges was unusual and argued that the Justice Department was being unnecessarily harsh against the pair.