Mr Scott Sullivan and Mr Buford Yates Jr, two former WorldCom executives, were indicted by a federal grand jury in Manhattan yesterday on charges of securities fraud and making false statement to authorities stemming from the company's $7.2 billion (€7.3 billion) accounting fraud.
The indictment follows the arrest this month of Mr Sullivan, WorldCom's chief financial officer, and Mr David Myers, its former controller, after the telecoms firm filed for the largest US bankruptcy.
The indictment did not include Mr Myers, raising speculation that he was in talks with the government on a plea deal to secure his co-operation. Two other WorldCom financial executives, Ms Betty Vinson and Mr Troy Normand, may also be co-operating. They were listed in the indictment as co-conspirators, although they have not been charged.
The indictment largely follows the criminal complaint that the US Attorney's Office filed against Mr Sullivan and Mr Myers on August 1st . It alleges that Mr Sullivan and Mr Myers led a scheme to account wrongly for expenses related to third-party lines WorldCom had leased beginning in October 2000.
The executives carried out the scheme because they had noticed WorldCom's expenses were rising too far as a percentage of its revenues, endangering its share price, according to the indictment. It accuses them of directing Mr Yates, WorldCom's director of general accounting, and his assistants, Ms Vinson and Mr Normand, to book the firm's line costs as capital expenditures, which could be amortised, instead of as current expenses. Between October 2000 and April 2002, the scheme increased WorldCom's reported earnings from its actual earnings by about $5 billion, the grand jury said. Mr Sullivan and his team never disclosed the change in the firm's books to Arthur Andersen, WorldCom's outside auditor, according to the indictment. - (Financial Times Service)
