Prosecutors secured a needed link in their quest to tie top WorldCom brass to alleged fraud at the company when former controller David Myers pleaded guilty Thursday in federal court to three felony charges.
The charges of securities fraud, conspiracy and making false filings with the Securities and Exchange Commission carry a maximum sentence of 20 years and at least $1.5 million in fines. But Myers could receive a lighter sentence if his cooperation assists prosecutors in building other cases.
Myers, 44, who lives in Madison, Miss., is the first to plead guilty after WorldCom’s disclosure of $7.2 billion in improper accounting dating to 1999. The admission hastened the long-distance phone giant’s filing in July of the largest bankruptcy case in history. The SEC charged it with fraud.
Myers is expected to help prosecutors’ case against former chief financial officer Scott Sullivan, who pleaded not guilty this month to fraud and conspiracy charges. Former WorldCom finance employee Buford Yates has pleaded not guilty to similar charges.
Sullivan’s cooperation could be crucial as prosecutors try to implicate others, such as former CEO Bernie Ebbers and current division President Ron Beaumont, who had been chief operating officer.
Myers, who reported to Sullivan, had little contact with Ebbers or Beaumont, legal and company sources say. Attorneys for Ebbers, Beaumont and Sullivan had no comment. But Myers ”will lay out for (prosecutors) who they need to get on their team,” says former prosecutor Robert Mintz of McCarter & English.
Prosecutors say Sullivan orchestrated a scheme to fraudulently reduce expenses by $5 billion from October 2000 into 2002. His goal: keep WorldCom’s earnings in line with Wall Street expectations, thus protecting its share price, while the industry slowed.
Myers played a big role, according to documents released by Congress and WorldCom. He indicated that once the alleged fraud was started, it was difficult to stop. Myers twice tried to dissuade an employee from raising concerns to WorldCom’s auditor.
In federal court Thursday in Manhattan, U.S. District Judge Richard Casey asked Myers if he knew that what he did was wrong. ”Yes, sir, I did,” he replied.
Myers, wearing a dark-blue pinstriped suit, said he was instructed by ”senior management” to falsify WorldCom’s books.
Myers’ attorney, Richard Janis, said Myers was a ”reluctant participant” in the scheme but accepted responsibility. Myers’ tentative sentencing date is Dec. 26. The SEC filed a civil fraud lawsuit against him Thursday, but Janis expects it to be settled.