Attorney General John Ashcroft and FBI Director Robert Mueller will speak publicly this afternoon on corporate crime, following the arrests this morning of former WorldCom Inc. executives Scott Sullivan and David Myers for their alleged participation in accounting fraud at the bankrupt telecommunications carrier.
Sullivan, former chief financial officer, and Myers, former controller, at the Clinton, Miss., company, turned themselves in at the U.S. Attorneys Office for the Southern District of New York in Manhattan, according to a Department of Justice spokesman in Washington. They are expected to be held until a court appearance is scheduled, the spokesman said.
According to a complaint filed in the southern district of New York, Sullivan and Myers are charged with conspiracy to commit securities fraud, including making false statements to auditors and to the U.S. Securities and Exchange Commission. Specifically, they are charged with having transferred approximately $3.8 billion in line cost expenses to capital expenditures on the companys balance sheet.
The complaint charges that after WorldComs expenses began to increase as a percentage of revenue in the summer of 2000, Sullivan “devised a scheme to hide WorldComs increasing expenses by causing substantial portions of WorldComs line costs to be transferred from WorldComs income statement into its capital expenditure accounts.” The complaint also claims that Sullivan instructed Myers to direct other WorldCom employees to make the accounting transfers.
WorldCom disclosed the alleged accounting irregularities June 25 and at the same time announced that it had fired Sullivan and accepted Myers resignation.
On July 21, the company filed for Chapter 11 bankruptcy protection, and on Tuesday its stock was delisted from the NASDAQ market.
Justice Department officials would not say whether charges were being planned for other former WorldCom executives or for the corporation itself.
Related Stories:
- FCC: WorldCom Services Wont Go Dark
- WorldCom: More Lumps
- Editorial: Wake-Up Call From WorldCom