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Tuesday, 5 November, 2002, 23:23 GMT
WorldCom fraud reaches $9bn
WorldCom graphic
WorldCom said its shares could be worth nothing
The scandal-ridden telecoms giant WorldCom has admitted even more fraud, according to the US regulator, the SEC.

In a court filing in New York, the SEC said that WorldCom has admitted that it concealed $9bn in expenses, all of which was converted into false profits.

The company said that on "very preliminary reviews" of its accounting, it expects an additional earnings restatement that could bring the total hole in its books to more than twice its original estimate.

WorldCom announced $4 billion in financial misstatements in late June, shocking a market already buffeted by the revelations of accounting irregularities at Enron.

At that time, the firm reported "accounting irregularities" which overvalued its income by $3.8bn and made it look profitable when it was in fact making a loss.

Two months later, the group revealed a further $3.3bn of improperly reported earnings.

WorldCom, which is now in Chapter 11 bankruptcy, has reported further losses for July and August, and asked for a five month extension to come up with a reorganisation plan.

The company also warned that when it emerges from bankruptcy proceedings next year, its shares could have little or no value.

Criminal charges

WorldCom is still facing criminal and regulatory investigations in the US over the accounting fraud scandal which led to the world's largest bankruptcy in July.

But rumours are circulating that the SEC wants to agree a quick deal with the company - still one of the largest telecoms operators in the US - so that it can emerge from bankruptcy more quickly.

That might put the job of Harvey Pitt, the head of the SEC, under threat if the Democrats retain control of the US Senate.

They have been highly critical of his handling of corporate scandals.

WorldCom is obliged to file its monthly financial statements to the US Bankruptcy Court as part of the its reorganisation.

The company reported a loss of $429m (277m) for July and August on revenue of more than $4.8bn (3.1bn).

It has recently said it would be March 2003 at the earliest before it could emerge from bankruptcy.

Meanwhile, more charges of inappropriate loans to the former head of WorldCom, Bernie Ebbers, have emerged.

According to newspaper reports, based on SEC filings, Mr Ebbers may be accused of taking company loans and using them to build his own home and give loans to relatives.

Mr Ebbers testified in June to the US Congress as the scandal broke.

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The BBC's Rodney Smith
"Fraud may have been taking place over a much longer time span than we thought"
WorldCom

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