Jury Told of WorldCom Accounting Distortions
A former WorldCom Inc. accountant testifying Thursday in the fraud trial of ex-Chairman Bernard J. Ebbers said he tipped off the company’s internal auditors after he refused to make a $718-million entry he considered suspicious.
A teary-eyed Mark Abide said his boss in the accounting department asked him in April 2002 to make an entry that others in the division had refused to make.
Abide, who said he’d made questionable accounting entries over the preceding year, told federal jurors in New York that on that occasion he refused.
“I kind of went off on them and said no way was I going to start booking the entry,” said Abide, as he recalled a discussion with his boss and colleagues in the accounting department. “They were silent for a while and then they said they understood.”
Abide is the fourth former WorldCom accountant to testify about the $11-billion fraud that drove the long-distance company into bankruptcy. Like the others, Abide said his concerns mounted over 2001 as superiors directed him to enter balance sheet adjustments totaling hundreds of millions of dollars. He’s the only one who tipped internal auditors.
Abide told jurors that in mid-2002 he sent WorldCom auditors an e-mail with an attached news article, the contents of which he didn’t describe in court.
The article is about a WorldCom financial analyst who was fired after alleging tax fraud at the company.
“This is worth looking into from an audit perspective,” Abide wrote in his e-mail.
Ebbers, 63, is on trial for securities fraud, conspiracy and other charges. He faces a maximum of 25 years in prison if convicted. WorldCom emerged from bankruptcy as MCI Inc. in April and is now based in Ashburn, Va.
Prosecutors say Ebbers and ex-finance chief Scott D. Sullivan directed subordinates to inflate revenue and hide $3.8 billion in line costs -- fees paid to other telecommunications companies to use their lines -- to prop up the company’s stock price.
Sullivan, who has pleaded guilty and is cooperating with prosecutors, is expected to take the stand Monday.
Abide, who oversaw WorldCom’s property accounting group in Texas, was testifying for the government as part of an agreement to avoid prosecution. He told jurors that he was asked in April 2001 to make an accounting entry for “prepaid capacity” that had the effect of increasing company assets.
Abide said he didn’t understand what “prepaid capacity” was and was told that Sullivan and Myers had “come up with it.” He said he made the entry, “hoping that it was legitimate.”
Abide said he continued to make comparable entries throughout 2001, growing increasingly concerned about their size and justification. By April 2002, he refused to make an entry to the company’s books after learning that his colleagues had also refused. He subsequently sent his e-mail to the internal auditors.
