Posted on 08/08/2002 4:58:43 PM PDT by MeekOneGOP
WorldCom Takes Another $3.3 BILLION Write-Off !
Hmm? I wonder what the markets will do tomorrow?
I'll find a linkable story and post it !
NEW YORK (Reuters) - Bankrupt telephone company WorldCom Inc. has discovered about $2 billion in additional accounting discrepancies, CNBC reported on Thursday, citing sources familiar with the matter.
A spokeswoman for Clinton, Mississippi-based WorldCom declined requests for comment on the report. The reported errors come on top of $3.85 billion in expenses WorldCom said it improperly booked, and whose discovery in June led to its bankruptcy filing.
The broadcaster said WorldCom had used an accounting trick in which most of the $2 billion was taken from reserves set aside for bad debts and counted as operating income. It said the additional fraud was found by WorldCom's auditors poring over the company's financial statements in 1999 and 2000.
If true, new accounting woes would not come as a complete surprise, as WorldCom has been probing its books as far back as 1999. Lawmakers in the U.S. House of Representatives have said witnesses they interviewed said the problems may go back that far.
WorldCom Chief Executive Officer John Sidgmore said in an interview on July 9 that the company was investigating a few other issues but declined to elaborate.
``We knew the problem was a lot bigger than WorldCom first admitted to us, but certainly the extent of this fraud is staggering,'' said Ken Johnson, a spokesman for the U.S. House Energy and Commerce Committee, which is probing the debacle.
WorldCom has asked auditor KPMG to scour the company's books for more problems. The company hired William McLucas, the former head of the Securities and Exchange Commission's enforcement division, to do an independent investigation of the accounting irregularities.
WorldCom fired its chief financial officer, Scott Sullivan, in June for his role in the accounting debacle. The company filed for bankruptcy last month, the largest in U.S. history.
Sullivan and former Controller David Myers were arrested last week on charges of securities fraud and filing false statements with the SEC. They were released on bail.
The former chief executive of WorldCom, Bernie Ebbers, resigned in April under pressure from the company's massive debt load, a cratering stock price and questions about $408 million in loans he received from the struggling company.
Andersen handled the audit of WorldCom's books for 2001 and it reviewed the books of other giant corporate disasters like Enron Corp. and Global Crossing Ltd. The auditor said WorldCom withheld key information and did not consult with them about treating the expenses.
Deputy U.S. Attorney General Larry Thompson told Reuters he had not heard of the report, but that the government's investigation was proceeding.
``As we get into this investigation, we have to ask where the professionals were, the accountants and the lawyers,'' he said after speaking to the National Black Prosecutors Association Convention in Los Angeles. ``We are going to look at their roles in these transactions.''
WorldCom, which says it carries half of the world's Internet traffic and is the No. 2 U.S. long-distance telephone carrier, was charged with fraud by the SEC for allegedly hiding $1.22 billion in losses over 15 months starting in 2001.
The company also faces probes by the U.S. Justice Department.
A spokesman for Manhattan U.S. attorney had no comment but pointed out that his office previously said the investigation is continuing.
© 2002 Reuters
-- Flannery O'Connor title.
It illustrates how things can be worse even than the executives' sheepish admissions claim they are. It suggests that a company which purports to 'come clean' can still have problems that are detected only later.
| WorldCom ruse expands: report Earlier fraud points to additional $2.5 bln restatement |
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WASHINGTON (CBS.MW) -- WorldCom reportedly started hiding expenses and artificially inflating revenue as far back as 1999, and the bankrupt company's $3.85 billion accounting restatement may now expand to as much as $6.3 billion. WorldCom officials declined to address the latest revelations in The Wall Street Journal's online edition. "We have no comment at this time," said spokeswoman Sudie Nolan. In June, WorldCom disclosed that the company had concealed $3.9 billion in expenses for the first quarter and all of last year. That allowed WorldCom to post profits instead of actual losses during that period. Under the fraudulent accounting, WorldCom (WCOEQ: news, chart, profile) treated $3.8 billion in so-called line costs as capital expenses that could be written off over a period of years. The ruse inflated profits and helped the company hide its deteriorating financial health from investors. The company may have used that technique in 1999 and 2000, according to the latest reports. WorldCom may have inflated its reserves for bad debt and drew on that account to fill in gaps between projected profit and actual profit, CNBC reported. WorldCom Chief Executive John Sidgmore, who took over in May after the ouster of founder Bernie Ebbers, has repeatedly warned that the now-bankrupt company might find more problems on its financial books. A congressional committee probing the matter said last month that the problems might extend further back. Rep. Michael Oxley, R-Ohio, charged at the time that the restatement could grow by at least $1 billion, but the new findings could more than double that estimate. In late June, WorldCom fired Scott Sullivan, the longtime chief financial officer, after the accounting fraud was discovered. A month later, the company was forced to file for bankruptcy as cash ran out, and it was promptly stripped of listing on the Nasdaq stock market. Last week, Sullivan was arrested by federal investigators and charged with several counts of securities fraud. The latest news is likely to rekindle questions about the role played by Ebbers, who has strenuously denied any involvement in fraud. Iin April, Ebbers resigned under pressure after 17 years at the helm. Jeffry Bartash is a reporter for CBS.MarketWatch.com in Washington. |
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Oh the irony!
WorldCom's downfall is not only about fraudulent accounting. It's also about business/political hardball, and a very good case can be made that it was Ebbers, not Armstrong, who was on the side of the angels.
Like being "kinda pregnant"?
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