WorldCom to File SEC Report
WorldCom Inc. will file today a report under oath to federal regulators detailing its $3.9-billion accounting error, as internal and external investigators probe its corporate records to determine if the problem began before 2001, sources familiar with the situation said Sunday.
The Clinton, Miss.-based company faces charges of fraud for accounting irregularities that allowed it to hide $1.2 billion in losses over the last five quarters--making it one of the largest accounting scandals in U.S. history.
“We’re demanding that they make a statement under oath, telling the American public exactly what went on there and what their true financial condition is,” Securities and Exchange Commission Chairman Harvey L. Pitt said Sunday in an interview on ABC’s “This Week.”
“If there’s even an iota of false statement in there, people will pay heavily. If the truth is in there and people get to know at least what the circumstances are, then we’ll have an informed market, and there won’t be insiders who can play games with the unsuspecting public,” Pitt said.
New accounting scandals from WorldCom and office equipment maker Xerox Corp. added to the investor distrust created by last year’s collapse of energy trader Enron Corp. and left Wall Street bracing for more bombshells.
Two congressional committees subpoenaed testimony and documents from WorldCom executives, while President Bush said the Justice Department will hold accountable those responsible for any corporate wrongdoing.
“WorldCom was the last straw. I think Congress will now pass something. With midterm elections in the fall, no one wants to hear the public say, ‘You haven’t done anything about this,’ ” said Margaret Blair, a visiting professor at Georgetown University Law Center who specializes in corporate governance.
WorldCom must provide a detailed report to the SEC before the stock market opens today. The report, which will be released to the public, is expected to give investors and lawmakers a clearer understanding of WorldCom’s true financial standing and shed light on how many executives at the company participated in the scandal, sources said.
WorldCom declined to comment on the report.
