Andersen Did Not Raise Red Flag, WorldCom Says

WorldCom Inc., rocked last month by a $3.9-billion accounting scandal, said Monday that Arthur Andersen reported no problems with its financial statements for 2001 during a meeting in February.

The disclosure came as the telecommunications giant provided more details of the accounting fiasco in a revised filing with the Securities and Exchange Commission.

WorldCom submitted its initial statement a week ago and was immediately criticized by the SEC for not being more forthcoming.

In the latest filing, WorldCom said its audit committee met Feb. 6 with Andersen to discuss its audit of the company’s operating results and financial position for the year ended Dec. 31.

Andersen noted that there were “no significant or unusual transactions” and that it had “no disagreements with management” regarding accounting positions.

WorldCom, the nation’s No. 2 long-distance telephone provider, is teetering on the verge of bankruptcy after disclosing June 25 it disguised nearly $4 billion of expenses as capital expenditures to appear more profitable.

The SEC has filed a civil fraud suit, and the Justice Department also is investigating.

In testimony Monday before a House panel also probing the scandal, WorldCom Chairman Bert Roberts called Andersen’s failure to uncover the irregularities “inconceivable.”

Andersen, WorldCom’s accountant during the five quarters in question, has said its work was in compliance with SEC standards. It has suggested that former Chief Financial Officer Scott D. Sullivan was to blame and claims important information was withheld from auditors.

Testifying Monday before the House panel, former Andersen partner Melvin Dick said auditors rely “on the honesty and integrity of the management of the company.”