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Thursday, 26 September, 2002, 22:42 GMT 23:42 UK
WorldCom employee enters guilty plea
WorldCom graphic
WorldCom's former controller David Myers has pleaded guilty to taking part in an accounting scandal which led to the downfall of the US telecoms firm.

Mr Myers has pleaded guilty to false filing of documents with securities regulators, conspiracy to commit fraud and securities fraud.

He is the first former WorldCom employee to plead guilty to such charges. Prosecutors have alleged that a conspiracy at WorldCom allowed it to inflate its earnings by $5bn (3.2bn) over a period of 18 months.

WorldCom became the largest corporate failure in US history when it filed for bankruptcy in July.

"I was instructed on a quarterly basis by senior management to ensure that entries were made to falsify WorldCom's books to reduce WorldCom's reported actual costs therefore increasing reported earnings," Mr Myers told the judge.

He added that he carried out work at the direction of senior management to make accounting changes "for which I knew there was no justification or documentation".

The false filing charge carries a sentence of 10 years, while the fraud charges each carry a five year sentence.

Conspiracy allegations

Earlier this month WorldCom's former chief financial officer Scott Sullivan pleaded not guilty to fraud charges.

Prosecutors have alleged that WorldCom started an illegal scheme in October 2000 which aimed to hide expenses so the company's earnings could be boosted to meet the expectations of financial analysts.

But Mr Sullivan pleaded not guilty to the charges and was released on bail with a surety of $10m.

WorldCom's former director of general accounting, Buford Yates, also pleaded not guilty to taking part in the alleged conspiracy.

States' evidence

But Mr Myers' guilty plea is almost certainly a precursor to his implicating other WorldCom executives, former Securities and Exchange Commission assistant director of enforcement Marvin Pickholz told the BBC's Today programme.

"They're looking for him to point the finger at people and say, this person either told me to do it, or this person knew exactly what I was doing because I told him," he said.

"There's a process within the rules that allows the prosecutor - if he or she chooses - to send a letter to the judge, saying that your cooperation has been so helpful and so significant that they should depart from the guidelines.

"That could reduced the term of imprisonment by as much as 50% or even 75%."

Bush urges fraud crackdown

Earlier on Thursday, President George W Bush had told federal prosecutors to take a tough line on business executives found guilty of corporate wrongdoings "for the sake of our free market".

"No boardroom in America is above or beyond the law," he said.

"We're defending our free enterprise system against corruption and crime, and we're beginning a new era of corporate integrity," he added.

Investors' confidence in US companies was shaken by the scandals at Enron and WorldCom.

Earlier this year Congress rushed through legislation aimed at tightening-up financial reporting by US companies.

 WATCH/LISTEN
 ON THIS STORY
Prof Gerald Treece of the Texas College of Law
"It is a very significant development"
Marvin Pickholz, Ex-SEC lawyer
"Corporate America would just as soon have a few high-profile cases and then say, alright, we've put this behind us"
WorldCom

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16 Sep 02 | Business
10 Sep 02 | Business
04 Sep 02 | Business
04 Sep 02 | Business
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