WorldCom executives will be facing tough questions from the US House Financial Services Committee today about how a $3.85 billion accounting error at the telecommunications giant escaped notice for over a year.
The second-largest US long-distance telephone carrier is embroiled in the book-keeping scandal which hid $1.22 billion in losses over five quarters starting in 2001 - a debacle that could eclipse the crash of Enron, which filed last year for the largest bankruptcy in US history.
The Committee, which probed auditor Andersen's role in the Enron collapse, will hold a hearing at 1 p.m. (6 p.m. Irish time) delving into how the errors went undiscovered and whether laws need strengthening.
"It appears that some of these cost-cutting efforts and cooking the books occurred to basically hide a failing business practice," Mr Michael Oxley, chairman of the committee, said to reporters yesterday.
WorldCom has said it is also probing its 1999 and 2000 financial statements for further accounting irregularities.
The men at the centre of the controversy, former WorldCom CEO Mr Bernard Ebbers, former Chief Financial Officer Mr Scott Sullivan and former controller Mr David Myers have been subpoenaed to appear but may invoke their right not to testify, like Enron CEO Mr Kenneth Lay did last year.
A congressional source said yesterday that Mr Ebbers tried to cut in half the budget of the company's internal audit unit but it was only sliced 10 per cent. Mr Ebbers resigned in April under pressure for the company's huge debt and big personal loans.
Internal auditor Ms Cynthia Cooper began uncovering the accounting problems in May but the committee scratched her appearance at the hearing for fear of disrupting federal investigations.