In the latest and most spectacular corporate financial scandal of this recession, WorldCom Inc. said last night that it improperly accounted for $3.8 billion in expenses in 2001 and 2002. The Clinton, Miss., telecommunications carrier said it plans to maintain business as usual despite the imminent layoff of 17,000 employees, but industry observers widely predict bankruptcy.
Scott Sullivan, chief financial officer, was fired, and David Myers, senior vice president and controller, resigned yesterday.
The company maintains that the improper bookkeeping will not affect customers or services. John Sidgmore, who became CEO after Bernie Ebbers was ousted in April, said his team was shocked to discover the accounting irregularities. “I want to assure our customers and employees that the company remains viable and committed to a long-term future,” Sidgmore said in a press release late Tuesday. “Our services are in no way affected by this matter, and our dedication to meeting customer needs remains unwavering.”
Beginning Friday, WorldCom will let go 17,000 employees, primarily in areas of discontinued operations, operations and technology functions, attrition, and contractor terminations, the company said.
The Securities and Exchange Commission, which began an investigation of WorldCom in February, said today that it is ordering the company to file under oath a detailed report of the circumstances.
“The WorldCom disclosures confirm that accounting improprieties of unprecedented magnitude have been committed in the public markets,” the SEC said in a prepared statement. “These events further demonstrate the need for comprehensive market regulatory reforms that the administration, the Congress, and the SEC have been advocating and implementing.”
Related stories:
- Inside WorldComs Billing Blunders (Baseline)
- WorldCom Exits Wireless Reseller Business
- WorldCom CEO Ebbers: Requiem for a Heavyweight (The Net Economy)