- The US Department of Justice has charged two former WorldCom executives with securities fraud, calling them "no better than common thieves" and promising ongoing investigation that could lead to more arrests.
US Attorney General John Ashcroft had harsh words for Scott Sullivan, former WorldCom chief financial officer, and David Myers, former controller, who are charged with hiding almost $US4 billion of debt at the major US telecom and internet provider. The Justice Department's seven-count complaint alleges that Sullivan told Myers to book the corporate debt as credit, setting off a chain of events that led to the company's filing for bankruptcy in July -- the largest Chapter 11 bankruptcy in US history.
Sullivan and Myers appeared in the US District Court for the Southern District of New York on Thursday afternoon (US time) after surrendering to the US Federal Bureau of Investigation (FBI) earlier in the day. Both are free on bail; Sullivan posted a $US10 million bail using a lien on property in Boca Raton, Florida, while Myers met a $US2 million bail. A September 3 hearing is scheduled.
If indicted and convicted, each could serve up to 65 years in prison, Ashcroft said. The attorney general said the arrests help send a "clear, unmistakable message" that "corrupt corporate executives are no better than common thieves when they betray their employees and steal from their investors."
Ongoing matter
Though the Department of Justice says others are involved with the fraud, it will not give names. On Thursday, Ashcroft would not say if other individuals, or even the company itself, will be charged.
"It is fair to say this is an ongoing matter, and for us to comment further would be inappropriate," he said.
FBI Director Rober Mueller added that his agency "has not and will not" be distracted by its recent antiterrorism focus. "We will sustain this effort for as long as it takes."
The charges accuse Sullivan and Myers of securities fraud, conspiracy to commit securities fraud, and filing false statements with the US Securities and Exchange Commission.
The criminal charges are politically motivated and rushed, Sullivan's attorney, Irvin B Nathan, said in a written statement.
"We very much regret the rush to judgment and the part that politics has obviously played in bringing with great fanfare criminal charges with less than a month's reflection on WorldCom's complex accounting issues," the statement said.
"As President Bush acknowledged recently, accounting procedures are not black and white; there are various shades of gray. There is substantial room for disagreement on accounting issues, including cost allocation. We will vigorously contest the criminal charges brought against Mr. Sullivan, who looks forward to his day in court, hopefully without the unfair taint of the current political climate."
Telecom troubles
The charges are the latest blot on the telecommunications industry, which in the last year has struggled with accounting scandals and falling profits.
The SEC has already filed civil charges against WorldCom. WorldCom revealed the alleged accounting irregularities in an announcement in late June.
At a congressional hearing on Tuesday, senators railed at top industry executives over their companies' accounting practices. At that hearing, WorldCom CEO John Sidgmore said his company will pursue any wrongdoing that investigators find.
Officials said that Sullivan and Myers could not be charged under the new 2002 Accountability Act because it was passed after their alleged crimes were committed. The act was signed into law by President George W Bush on Tuesday, and Ashcroft gave the official nod to implement it on Thursday.
(Nancy Weil of the IDG News Service contributed to this report.) Chiger writes for the Medill News Service.