US cracks down hard on WorldCom
Send in the clowns
The US government declared its intention to haul WorldCom Inc company and its executives over the coals yesterday, with legislators issuing subpoenas against executives and the Securities and Exchange Commission charging the firm with fraud.
The attacks from Washington followed the Clinton, Mississippi-based carrier's announcement on Tuesday that its accounts for the last five quarters featured $3.8bn worth of mis-statements in what is being seen as the US' biggest financial scandal ever.
Yesterday, SEC chairman Harvey Pitt, said in a TV interview that the agency would seek "hard time for hard crime" when it came to "white collar" crime, pledging to make it "so unpleasant, so painful and so impossible" for perpetrators.
Pitt's firebrand comments came as the SEC confirmed it was charging the firm with fraud, saying the misstatements were intended to mislead investors and keep the company's earnings in line with Wall Street estimates. The SEC, amongst other things is seeking orders preventing WorldCom from destroying documentation, or making any extraordinary payments to current or former officers.
Pitt's comments were backed up by US treasury secretary, Paul O'Neill, who said in a TV interview that the executive and congress were considering legislation that would allow the SEC to seize funds of executives involved in corporate fraud cases. In the interview with ABC television, O'Neill said the aim was to ensure that "while these cases are being litigated the money doesn't flow away and can be redistributed to employees and shareholders." He added that CEOs should be held responsible for being aware of any information that could affect a company's value, and that they should face criminal prosecution if accounts are exposed as false.
Meanwhile, congress stated its intention to investigate the WorldCom debacle. The House Committee on Financial Services issued subpoenas to WorldCom executives, including CEO John Sidgmore, and former CEO Bernie Ebbers, ordering them to appear before it on July 8.
And if it felt like the WorldCom scandal is already becoming a circus, the clowns have certainly arrived. A slew of shareholder lawsuits were announced by law firms yesterday, with WorldCom, former CEO Bernie Ebbers and WorldCom's accountants, Arthur Andersen all being targeted.