WorldCom chiefs refuse to answer panel's questions

INVOKING his Fifth Amendment right, WorldCom's former chairman refused to answer questions yesterday from a congressional panel investigating nearly $4 billion in accounting irregularities at the telecommunications giant.

"I do not believe I have anything to hide in these or any other proceedings," Bernard J Ebbers told the House Financial Services Committee. He said he'd been advised by his Washington attorney, Reid Weingarten, to remain silent because of the range of investigations by the Justice Department and Securities and Exchange Commission (SEC).

WorldCom's former chief financial officer, Scott Sullivan, also refused to testify, "based upon the advice of counsel".

John Sidgmore, WorldCom's president and chief executive officer, blamed the company's former management for the accounting problems.

"WorldCom uncovered this problem internally," Sidgmore said in prepared testimony. "The kind of initiative demonstrated by our internal audit group is to be applauded and will continue to be encouraged."

WorldCom chairman Bert Roberts called the accounting improprieties "an outrage to me", and said auditor Arthur Andersen was responsible. "To my mind, the failure of our outside auditors to uncover them is inconceivable," he said.

Melvin Dick, the senior Andersen audit partner for WorldCom, testified that neither he nor any member of the Andersen team "had any inkling" of the improper accounting.

WorldCom is the latest major corporation to face allegations of executive wrongdoing and accounting irregularities driving down public confidence in business and the stock market. Congress is already investigating the bankruptcies of Enron and telecommunications company Global Crossing and the role played by accounting firms. Andersen has been convicted of obstruction of justice for destroying Enron-related documents.

In an attempt to boost sagging investor confidence, President Bush is proposing tougher penalties including jail time for corporate officials who lie on financial statements, an administration official said yesterday.

The White House planned yesterday to formally endorse the goals but not all the details of legislation introduced by Sen Paul Sarbanes, that would tighten oversight of the accounting industry. The administration wants to empower the SEC to ban corporate executives and directors who commit wrongdoing from serving in those roles again, a step the bill does not take.

WorldCom is battling to avoid bankruptcy after disclosing that it disguised $3.9 billion of expenses as capital expenditures to appear more profitable. The SEC has filed a civil fraud suit against WorldCom, and the Nasdaq Stock Market plans to de-list the company's shares, which have plunged from more than $63 in June 1999 to 22 cents yesterday.

Wall Street analyst Jack Grubman, who had promoted WorldCom stock, said in testimony prepared for the hearing, "I regret that I was wrong in rating WorldCom highly for too long," but insisted he was unaware of the company's true financial condition.