Worldcom finance duo charged with fraud
Two former top financial executives at WorldCom Inc were taken to court by the FBI yesterday, handcuffed and in full view of the massed ranks of the media, in a major public demonstration of the authorities' anxiety to crack down on corporate fraud.
Former CFO Scott Sullivan and David Myers, former financial controller, were arrested and charged with conspiracy to commit security fraud and five counts of making false filings to the Securities and Exchange Commission. If convicted, the two men could face five years in prison and a $250,000 fine on the conspiracy count, and 10 years and a $1m fine on each of the fraud and false filings counts.
The authorities have moved with extraordinary speed on the case; it is less than six weeks since WorldCom admitted financial misstatements to the tune of $3.8bn over the last five quarters. But their concern stems from the way that events at WorldCom, coming so soon after the Enron scandal, have undermined confidence in the whole system and helped to drag down a troubled stock market.
As US president George Bush has pledged to "fully investigate and hold people accountable for misleading not only shareholders but employees as well", the FBI was hardly likely to treat Sullivan and Myers with kid gloves when they surrendered themselves, by appointment, at the FBI's New York headquarters at 7am yesterday.
Instead of the gentle treatment often afforded white-collar defendants, the two men were handled like any other high-profile criminal defendants as they were taken to court. While they are accused of booking company expenses as capital spending to artificially inflate income, WorldCom's former CEO Bernie Ebbers has yet to be charged, though he and Sullivan were such a double act they were referred to as "The Scott and Bernie Show".
This could suggest that the authorities are leaving the way open for a plea bargain with Sullivan and Myers to offer them lower sentences in return for evidence against Ebbers.
On Tuesday President Bush promised: "No more easy money for corporate criminals. Just hard time," when he signed a bill that a law that quadruples penalties for accounting fraud. The Sullivan and Myers trial will be the first test of this new approach.