Silent WorldCom FD 'held up fraud inquiry'
The former finance chief of WorldCom has been accused of attempting to hold up an inquiry into the alleged $3.8bn (£2.5bn) fraud, according to a report released yesterday.
As Scott Sullivan refused to answer questions at a House of Representatives committee meeting, it emerged that he had misled WorldCom’s internal auditor as she sought to investigate suspicious transactions at the root of the alleged fraud.
Sullivan and his former boss Bernard Ebbers, the former chief executive at the beleaguered telecom, both exercised their constitutional rights against self-incrimination by refusing to answer questions at the congressional committee meeting.
The news comes as US president George W. Bush prepared to announce today tough new penalties for directors who deliberately manipulate company accounts.
Executives at WorldCom have been subpoenaed to explain to the Financial Services Committee, the same one which questioned Enron, how the alleged $3.8bn fraud was covered up for a year.
The outcome of the hearing will be used to determine what laws were broken and what accounting regulations need to be improved.
WorldCom admitted to improper accounting on 26 June. The company said an internal audit showed that transfers of $3.055bn for 2001 and $797m for the first quarter of 2002 were not made in accordance with generally accepted accounting principles.
WorldCom said restating these improper transfers would cut earnings to $6.339bnm for 2001 and $1.368bn for the first quarter of 2002. It added it has asked its new auditors KPMG – Andersen was sacked by the company this year – to undertake a comprehensive audit of the company’s financial statements for 2001 and 2002, and will reissue these statements.