WorldCom Bad Accounting Revealed. WorldCom has found more accounting errors that could enlarge the $7.2 billion in misdeeds it has already revealed, people close to the situation say.
The amount is still being determined, but WorldCom will likely have to write off about $500 million for billing mistakes made over about five years, people with knowledge of the situation say. The Wall Street Journal reported Thursday that WorldCom’s new woes could total $2 billion, but the figure is in dispute.
Other problems stem from the way WorldCom accounted for its stakes in Latin American phone companies Embratel and Avantel. The outcome could affect everything from WorldCom’s revenue and expenses to its debt and asset values. WorldCom owns 19.3% of Embratel and 44.5% of Avantel.
Other accounting misdeeds are possible, insiders say. WorldCom has said it might write off up to $50.6 billion in goodwill and other assets when it restates financials to adjust for accounting misdeeds.
New revelations could add more doubt to WorldCom’s hope of emerging intact from the largest-ever bankruptcy protection filing. WorldCom lacks audited financial statements that a buyer would want. Also, the possibility of more fraud could spook already jittery customers of the No. 2 long-distance company.
Still, WorldCom’s cash position is $400 million better than projected, insiders say. And, new accounting woes won’t imperil loans it secured to operate under bankruptcy protection. In fact, it still hasn’t tapped an initial loan commitment of $750 million.
The SEC charged WorldCom with fraud in June. Two former executives have been indicted for securities fraud and conspiring to inflate earnings.
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