Former WorldCom chief executive Mr Bernie Ebbers was linked for the first time to the company's $11 billion accounting fraud by two reports filed with bankruptcy court last night.
One report said Mr Ebbers was aware that the company inflated revenues by using "financial gimmickry." The second report said WorldCom gave its auditors a special set of financial reports that masked its true operating results and differed from the books used by management.
One of the reports was prepared at the request of WorldCom by Mr William McLucas, former chief of the enforcement division of the Securities and Exchange Commission.
The other was compiled by former US Attorney General Richard Thornburgh, who was appointed as an independent examiner by the bankruptcy court.
"There is clear evidence that Ebbers was aware of certain practices . . . used to inflate reported revenues," the McLucas report said. "Ebbers was aware, at a minimum, that WorldCom was meeting revenue expectations through financial gimmickry".
The Thornburgh report said Mr Ebbers sold WorldCom stock despite outside counsel's advice that a $70 million sale might be inappropriate ahead of a negative financial report.
That could raise questions of insider trading, legal experts said.
The reports also outlined lax internal controls, limited oversight by a board of directors filled with personal friends and business associates of Mr Ebbers, and a corporate culture in which Mr Ebbers and former chief financial officer Mr Scott Sullivan ran the company unchecked.