Accounting Spot-Check Unearthed A Scandal in WorldCom's Books

The Wall Street Journal ^ | Thursday, June 27, 2002 | JARED SANDBERG, DEBORAH SOLOMON and REBECCA BLUMENSTEIN

[TroutStalker]

NEW YORK -- It all started a few weeks ago with a check of the books by Cynthia Cooper, an internal auditor for WorldCom Inc. The telecom giant's newly installed chief executive had asked for a financial review, and her job was to spot-check records of capital expenditures.

[Woodkirk]

I can hear Sullivan at the meeting:

"Gentlemen, these expenses, as I have listed them, will produce long-term value. If they are kept where they are, the stock price will stay up and the charade can go on for a long time. Isn't that what is meant by long term value? If they are listed them in the expense column, our stock will drop like a rock -- wil that be good for our company in the long term?

[Blank stares ]

[aShepard]

Thanks for the post. Unf**kin' believable.

Out of about $8 billion in capital expenditures, Arthur Anderson didn't even attempt to look at the veracity of the capital accounts, and even allowed the company to capitalize $500 million in construction interest costs on these bogus entries.

Now, WorldCon will be taking another $450 million hit, as the Ebbers loan is collateralized with his 26.9 million shares of stock, once worth about $1.8 billion, now worth $2.4 million.

[Fixit]

Thanks for posting this, it is the first approachable explanation of the fraud that I have read.

[John O]

The two men shared an adjoining office at their Clinton, Miss., headquarters.

I knew that this was connected to clinton. Everything that touches a clinton turns to $h!t. I'm amazed that any town named clinton doesn't change it's name.

< /tin foil hat off>

God Save America (Please)

[VOA]

The two men shared an adjoining office at their Clinton, Miss., headquarters.

I know that I blinked twice when I heard that a rapidly-advancing telecommunications/technology
company was headquartered in Mississippi, run by a Canadian, and was able to swallow MCI.

Nothing personal to our Mississippi freepers (the state has come a LONG way since I
first visited it in the mid 1960's)...but I was always saying to myself "something just
doesn't add up about this picture".

[floriduh voter]

It seems to me that candidate for governor McBride was bragging at the Tampa Bay Business Journal that Arthur Andersen was one of Holland & Knight's clients. I'm wondering if H & K is tied to the Worldcome/QWest situation as well. I wouldn't doubt it and when these stories break, McBride goes into hiding.

Still no tv for McBride unless it's a freebee and he's still doing campaign stops with Reno. Reno and McBride have already teamed up IMO but how will they divide the spoils in September?

[john in missouri]

I can hear Sullivan at the meeting:

"Gentlemen, these expenses, as I have listed them, will produce long-term value. If they are kept where they are, the stock price will stay up and the charade can go on for a long time. Isn't that what is meant by long term value? If they are listed them in the expense column, our stock will drop like a rock -- wil that be good for our company in the long term?

[Blank stares ]

Be honest now... we know who you are...

Well, almost... are you KPMG, a board member, or a secretary? :-)

[john in missouri]

I know that I blinked twice when I heard that a rapidly-advancing telecommunications/technology company was headquartered in Mississippi, run by a Canadian, and was able to swallow MCI.

Years and years ago I ran across a little company called WorldCom. I told my wife at that time that this company was going to go places. Nonetheless, even I was a bit surprised when they took over MCI.

Well, they've certainly gone places now...

[Woodkirk]

None of the above -- the mouse in the corner behind the guy
with the cheesy look on his face.

[tictoc]

In related news, the Arthur Andersen auditor in charge of the WorldCom account expressed regret that his professional ability was being called into question.

"I can't believe that these good people at WorldCom pulled the wool over my eyes," he said.

[Doctor Stochastic]

In quarter after quarter, starting in 2001,...

Pre or post inauguration?