U.S. Closing In on WorldCom Execs
On the heels of one high-profile criminal case against corporate executives, federal prosecutors are moving quickly to bring charges against former officers of WorldCom Inc. for their roles in an accounting scheme that overstated revenue by $3.9 billion.
“Indications are that charges will be filed sometime next week,” a source close to the investigation and speaking on condition of anonymity told the Associated Press.
Co-founder and former Chief Executive Bernard J. Ebbers, former Chief Financial Officer Scott D. Sullivan and former Controller David Myers are expected to be named in indictments accusing them of defrauding investors in the nation’s No. 2 long-distance company and triggering the nation’s biggest bankruptcy, said unnamed sources cited in several news service reports and the Wall Street Journal.
“We are confident that the prosecutors will ignore the howling mob and concentrate on the evidence, and if they do so, Mr. Ebbers will not be prosecuted,” said his attorney, Reid Weingarten.
Lawyers for Sullivan and Myers could not be reached for comment.
On Wednesday, authorities arrested cable pioneer John Rigas and two of his sons. The three were accused of looting Adelphia Communications Corp. and using the cable company as their “personal piggy bank.” Two other former executives also were charged.
“The government is going to indict lots of corporate executives who abused their positions, and the markets better get used to it,” said telecommunications analyst Scott Cleland of research firm Precursor Group in Washington. “There’s nothing like having examples to increase deterrence.”
With pressure mounting from Congress and the White House, prosecutors are moving with unprecedented speed to bring a case against former WorldCom executives, said Washington lawyer Jacob Frenkel, a former Securities and Exchange Commission enforcement officer.
“It would be tragic if the intense pressure ... results in a race to see which prosecutor’s office can bring most quickly the biggest and baddest case,” Frenkel said. “Just because politicians are demanding a shoot-first, ask-questions later approach does not mean that’s what the alleged conduct warrants.”
In some cases, though, prosecutors may have ample evidence, the ability to analyze it quickly and willing insiders ready to testify, making a case easier to put together, said Richard Marmaro, a Los Angeles white-collar defense lawyer and former assistant U.S. attorney.
The accounting scheme has been described as a simple transfer of expenses to the capital investment line, thus boosting revenue and allowing the firm to post profit for 15 months through March when it should have reported losses.
WorldCom could face criminal charges, according to reports. But legal and industry experts said that path may be unwise, partly because the company serves so many government agencies.
Also, Frankel said, “criminal indictment, with the accompanying stigma and potential for exclusion from government contracts, would be near-fatal for WorldCom.”
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Times staff writers Jube Shiver Jr. in Washington and James S. Granelli in Orange County contributed to this report.
