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
Oh the irony!
Yet another misleading headline. These people intentionally shuffle these monetary lies. Which word do you think ought to be in the headline, errors or fraud?
The American Heritage® Dictionary of the English Language:
error NOUN: 1. An act, assertion, or belief that unintentionally deviates from what is correct, right, or true. 2. The condition of having incorrect or false knowledge. 3. The act or an instance of deviating from an accepted code of behavior. 4. A mistake.
fraud NOUN: 1. A deception deliberately practiced in order to secure unfair or unlawful gain. 2. A piece of trickery; a trick.