Worldcom executives earned $104 million (€107 million) in salaries, bonuses and share sales even as the bankrupt telecoms group was using accounting tricks to exaggerate its earnings by billions of dollars.
The payments - half of which were in the form of profits on the sale of share options in 1999 - have renewed relevance after WorldCom revealed a further $3.3 billion of improper accounting stretching back as early as 1999.
The disclosure takes the total accounting fraud at WorldCom to $7.6 billion in just over three years and raised the prospect that investigators may uncover further manipulation of profits for 1999 and earlier years.
"Investors and creditors should be aware that additional amounts of improperly reported EBITDA [earnings before interest, taxes, depreciation and amortisation\] and pre-tax income may be discovered and announced," the company said yesterday in a statement.
The revelation that the accounting fraud began before 2001 is likely to increase the pressure from creditors for the replacement of Mr John Sidgmore, the long-serving WorldCom executive who took over from Mr Bernie Ebbers as chief executive in April.
Mr Sidgmore had previously distanced himself from the fraud by pointing to his decision to take a back-seat role at the company in mid-2000.
The new disclosures will strengthen the government's fraud case against Mr Scott Sullivan, former chief financial officer, who was arrested last week. They may also help investigators mount a case against Mr Ebbers, who has not been charged.
On Thursday Mr Ebbers's lawyer, Mr Reed Weingarten, insisted his client was not involved in the fraud. "The chief executive of a company with 60,000 employees can't know about every decision that is made," he said on CNBC, the US business television channel. "Accounting decisions are arcane. They're mysterious for people who are not trained in the science."
Analysts said the new revelations placed a further question about WorldCom's profitability in 1999. The reductions announced yesterday cut the company's pre-tax profit for 2000 to $1.7 billion from $4.97 billion.
But the adjustment to 1999 profits reduced pre-tax profits for that year to $4.4 billion, implying that either WorldCom's actual profits fell by almost two-thirds between 1999 and 2000, or that the company has yet to uncover further accounting tricks in 1999.
Mr Jim Andrew, a telecoms expert at Boston-based consulting group Adventis, said: "What is clear is that WorldCom wasn't nearly as profitable as they were telling the world. They never made the effort to integrate their acquisitions, so they ended up with hidden costs."
However, despite filing for bankruptcy, it has continued to provide services to customers. And a spokeswoman for the company in the Republic yesterday told The Irish Times the latest revelations would have no impact on the provision of services or on the group's cash position.
WorldCom employs 180 people in the Republic but is letting go 10 per cent of that workforce. It has 6,000 customers in the State with offices in Dublin, Cork, Limerick and Galway. It invested $35 million in a plant in Dublin last year. - (Financial Times Service)
