$2 Billion More in WorldCom Errors - CNBC

Reuters | 8/08/02

[kattracks]

NEW YORK (Reuters) - Bankrupt telephone company WorldCom Inc. has discovered about $2 billion in additional accounting discrepancies, CNBC said on Thursday, citing sources familiar with the matter.

Clinton, Mississippi-based WorldCom declined to comment on the report.

CNBC said WorldCom had used an accounting trick in which most of the $2 billion was reversed from reserves for bad debts into operating income. It said the additional fraud was found by WorldCom's auditors poring over its financial statements in 1999 and 2000.

WorldCom filed bankruptcy earlier this month, buckling under $40 billion in debt and a $3.85 billion accounting scandal. The $3.85 billion was found in its statements for 2001 and the first half of 2002.

WorldCom fired its chief financial officer, Scott Sullivan, who it alleged orchestrated the accounting debacle.

Last week, Sullivan and former Controller David Myers were arrested and released on bail. Chief Executive Officer Bernie Ebbers resigned under pressure in April.

WorldCom, which transmits half of the world's Internet traffic, has been charged with fraud by the U.S. Securities and Exchange Commission and faces an investigation by the Department of Justice.

[steveegg]

Now why am I not surprised that WorldCom's fraud started with the Era of S(l)ick? I'll lay odds that once they hit the '98 books, that they'll find that the fraud started then.

[LarryLied]

. . . discovered about $2 billion in additional accounting discrepancies. . .

oops...

Reminds me of the old Steven Martin routine.

Judge: It is illegal to hide billions of dollars of debt.

Ebbers: I forgot.

Judge: Doesn't matter if you forgot or not, it is a violation of law.

Ebbers: Well. . .EXCUUUUUUUUSSSSE MEEEEE!!!!

[Nuke'm Glowing]

"Just $2 billion? Hell that's nothing. WE lose more than that in a day."

- Your loving Federal Government

[TheBattman]

Misleading title...it was not accounting errors, it was out-and-out fraud....period. There is no way to make $3 billion in "errors"....

[Draakan]

Just got back from New York, and when I was there for 4 days, no Fox, so I had to watch CNBC. Every single "news story" that was presented by Forest Sawyer was Bush knew this, didn't do that, covered up this, improper that! And those idiots wonder why CNBC is sucking in the polls. It would be more informative if I just watched old reruns of Bugs Bunny.

[Ann Archy]

The only man dumber than Forest Sawyer is Aaron Brown. I FEEL your pain.

[Wyatt's Torch]

If I'm reading this right and it was simple reversals of bad debt accruals then every company on the face of the planet is guilty.

This is an expense that was taken in a prior period and put into a reserve on the balance sheet. When bad debts (customers who fail to pay) occur, you write it off against the reserve. Periodically, these reserves are reviewed to see if they are too high or too low. If too high, you write down the reserve and take it into operating income. This has no impact on cash flow because the decrease in the liability offsets the increase in operating income.

This is one of the most common accounting practices and every company on earth does this. Unless there is more to the story, this is a non-event.

[razorback-bert]

From the WSJ

Last month, senior WorldCom officials reviewed the reversals and then showed them to the company's auditor, KPMG LLP. It isn't clear whether the $2.5 billion relates entirely to reserve reversals or other items.

But the sum of improperly booked expenses could increase further. The latest jump relates to accounting for the year 2000. The company, which filed for Chapter 11 bankruptcy-court protection in July, has yet to review 1999.

[RightWhale]

Thanks for posting on these bookkeeping threads. Bookkeeping remains one of the 8 cosmic mysteries on earth.

[Wyatt's Torch]

Bookkeeping remains one of the 8 cosmic mysteries on earth.

You got that right. I'm not an accountant nor did I stay at a Holiday Inn Express last night but I've done enough time in the M&A field to know a little accounting. Glad it helped.

[Dane]

It said the additional fraud was found by WorldCom's auditors poring over its financial statements in 1999 and 2000.

And who was President of the United States at the time?

For all DU lurkers, the answer is Bill Clinton

[Dane]

Kat, reply #12 was meant to be directed to DU lurkers not yourself personally.

Sorry for any conflict in directing reply #12 to you.

[Hillarys Gate Cult]

Alert!!!

Fox News reports that WorldCom just announced that it's now 3.3 Billion.

[Bob]

Fox News just reported that the new fraud is even higher: over $3 billion in newly-discovered errors.

[Moonman62]

"Just $2 billion? Hell that's nothing. WE lose more than that in a day."

- Your loving Federal Government

The crooks in Washington are doing a good job of keeping us distracted while they pick our pockets, aren't they? Even conservatives and Republicans are walking around, thumping their copies of Das Kapital.

[Nuke'm Glowing]

Conservative? In Washington, D.C.?????? Thank God for the Endangered Species Act. What zoo is this "conservative" locked up in there? God forbid he's ever let our or allowed to speak, we might actually have some a virus called "honesty" seap into the district.

I do remember an animal called the "Republican". It's a cowardly creature, like a lemur or goat if I remember. They went extinct but the Liberals changed the name of another animal because it looked so much like a Demorat.