WorldCom executives continued to play damage control
yesterday, seeking to distance the company’s current management from the
past accounting irregularities that led to last month’s
$3.8 billion restatement of earnings.
In testimony before the House Financial Services Committee on Monday,
WorldCom CEO John Sidgmore sought to put distance between WorldCom’s current
top management and the actions of longtime WorldCom chief executive Bernie
Ebbers and former chief financial officer Scott Sullivan.
“We are fighting for our life,” Sidgmore told the committee. He said the
company continued to investigate the accounting irregularities going back
the last year and half, in addition to looking at transactions in 1999 and
2000. Sidgmore reiterated the company hoped to avoid a bankruptcy filing,
but he declined to rule one out.
Sidgmore said he did not find out about the accounting problems until June
20. He took over as chief executive in April, following Ebbers’
resignation after revelations he owed the company $366 million in
personal loans.
The company also filed a revised statement with the Securities and Exchange
Commission Monday afternoon, detailing how the $3.8 billion restatement came
about. A week ago, the SEC slammed the
company’s initial explanation as “wholly inadequate and incomplete.”
While stressing that it is awaiting the results of an internal investigation
headed by former SEC enforcement head William McLucas, WorldCom continued to
lay the responsibility for the company’s accounting practices at the feet of
Sullivan, Ebbers, former controller David Meyers, and star-crossed auditor
Arthur Andersen.
WorldCom said Andersen gave its accounting methods a clean bill of health as
recently as Feb. 6, 2002, reporting it had “no disagreements with management
and that there were no accounting positions taken by the company with which
Andersen was not comfortable.”
WorldCom’s filing came on the eve of President Bush’s long-awaited speech on
corporate responsibility, as the company has displaced Enron as the poster
child for bad business behavior.
Bush is expected to call for a raft of tighter laws on executive
compensation and corporate disclosure, including a provision doubling the
jail sentence for wire and mail fraud to 10 years.
In its SEC statement, WorldCom said the accounting problems were discovered
by Cynthia Cooper, the company’s vice president of internal audit, who began
an investigation of WorldCom’s bookkeeping of capital expenditures, which
eventually led to the earnings restatement.
Cooper spoke with Sullivan and Myers about her concerns on June 11,
according to the company, but Sullivan asked her to delay a full-blown audit
until the third quarter.
Sullivan and Ebbers, both of whom were called to testify before the House
committee, declined to testify yesterday, invoking their Fifth Amendment
rights against self-incrimination.
Before invoking his rights, however, Ebbers made a brief assertion of
innocence.
“I believe that no one will conclude that I engaged in any criminal or
fraudulent conduct during my tenure at WorldCom,” he said. “I am proud of
the work that I did at WorldCom.”
