WorldCom chief executive accused of fraud

Former WorldCom chief executive Bernard Ebbers has been indicted on federal charges stemming from the multibillion dollar accounting scandal at the telecommunications giant.

In an indictment filed in US District Court in Manhattan, Ebbers was charged with conspiracy to commit securities fraud, securities fraud and falsely filing with the Securities and Exchange Commission.

The indictment, similar to one which already charged WorldCom chief financial officer Scott Sullivan, accuses the men of deceiving the public, the SEC, securities analysts and others about WorldCom’s true declining financial condition.

According to the indictment, when the company’s results fell beneath analysts’ expectations in September 2000, Sullivan advised Ebbers that WorldCom should issue an earnings warning to alert investors, but Ebbers refused.

“Ebbers nevertheless insisted that WorldCom publicly report financial results that met analysts’ expectations,” the indictment said.

A month later, the men instructed subordinates “to falsely and fraudulently book certain entries in WorldCom’s general ledger” that misclassified expenses to diminish their effect on current profits.

The effort was meant to “satisfy analysts’ expectations, even though Ebbers and Sullivan knew that WorldCom’s true results in fact failed to meet those expectations,” the indictment said.

Ebbers resigned from WorldCom in April 2002, well after its stock price had begun a steady decline and soon after questions began to swirl about the company’s finances.

Two months later, WorldCom announced it had uncovered nearly €3.1bn in hidden expenses – the beginning of a spiral that would become the largest corporate fraud in US history. The fraud is now estimated at €9bn.

WorldCom, parent of the second biggest US long-distance telephone company, filed for bankruptcy on July 21, 2002.

Four former company executives, including controller David Myers, have pleaded guilty to criminal charges in the Justice Department’s fraud investigation and are helping federal prosecutors.

Sullivan was arrested in August 2002 on charges of securities fraud, conspiracy and filing false statements with the SEC.

Sullivan has made a plea deal with the government and has indicated he will testify in the case.

Ebbers and Sullivan were also charged with 15 violations of state securities laws in Oklahoma.

They are among six ex-WorldCom employees charged there in an accounting fraud that prosecutors say cost state pension funds €52m.

Oklahoma’s attorney general dropped criminal charges against Ebbers in November but has said he plans to refile them this year.