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Monday, 15 July, 2002, 22:17 GMT 23:17 UK
WorldCom's woes 'go back to 1999'
Former WorldCom chief executive Bernie Ebbers
The new evidence puts the ball in Bernie Ebbers' court
WorldCom, the US telecoms company at the heart of a wave of corporate scandals, may well have been misrepresenting its profits as early as 1999, a Congressional committee believes.

The House of Representatives' committee on energy and commerce has been examining boxes of WorldCom papers in its investigation into how the company came to admit last month that it overstated its profits by almost $4bn in 2001 and early 2002.

Rep. Billy Tauzin
Mr Tauzin is keen for his committee to share the spotlight
Now, committee chairman Billy Tauzin told reporters, the situation looks a great deal more serious.

"We're actually interviewing several witnesses at the moment who indicated to us that the problems may go back as far as 1999, not just 2000" as he had previously thought, said Mr Tauzin, a Louisiana Republican.

Shock treatment

WorldCom stunned the world on the evening of 25 June with the news that it had inflated its profits in 2001 and the first three months of 2002 by a total of $3.85bn (2.45bn).

It had done so, it appeared, by claiming operating expenses as capital spending - the equivalent of treating the purchase of paper clips as a major investment in expanding the business.

At the same time, it sacked its chief financial officer, Scott Sullivan, implying that the disgrace was - along with treasurer David Myers, who resigned rather than get fired - his alone.

But the scale of the alleged fraud perpetrated at WorldCom has suggested to some that other company officials must have been involved.

Inevitably, attention has focused on the firm's co-founder and, till April this year, chief executive, Bernie Ebbers.

On the advice of his lawyers, Mr Ebbers refused to give evidence to another House committee in case he might incriminate himself.

But because he prefaced his refusal with an emotional claim that he was entirely innocent, some Representatives angrily demanded that he testify, saying that by making a statement absolving himself he had negated his Fifth Amendment right to avoid self-incrimination.

Back to the books

The new evidence under consideration by Mr Tauzin's committee could well bring this ire to the fore once again.

WorldCom says it is examining its own books to see if there was any wrongdoing between 1999 and 2001.

According to Mr Tauzin, 1999 was when WorldCom first started capitalising excess capacity, putting a valuation on the spare space on its network and claiming it as an investment.

Now the committee is planning to ask for more information from Andersen - who were WorldCom's auditors as well as having done disgraced energy firm Enron's books - and from WorldCom.

Asked whether he had enough to prosecute either Mr Ebbers or Mr Sullivan, he denied that that was the aim.

"Our job is simply to find out what (went) wrong, and to find out if it's a failing of policy or the law," he said.

Nonetheless, some of the evidence released on Monday does seem to suggest that that Ebbers took decisions to try to hamper internal WorldCom audits of the company's financial accounts.

In the minutes of a 6 March board meeting, Mr Sullivan is said to have "indicated that Mr Ebbers had proposed a 50% reduction in internal audit compensation expense, but that the final decision was to limit the reductions to 10%."

WorldCom

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11 Jul 02 | Business
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