Posted on 07/01/2002 10:44:51 AM PDT by Dog Gone
WASHINGTON (AP) -- WorldCom Inc., already facing charges over nearly $4 billion in disguised expenses, told the government Monday that it is investigating possible irregularities in its reserve accounts.
Stock of the embattled telecommunications company plunged 90 percent to 6 cents a share in early trading after a three-day halt following its disclosure of accounting irregularities. More than 250 million shares changed hands in frenzied trading in the first 15 minutes.
Before the market opened, WorldCom submitted a sworn statement to the Securities and Exchange Commission, which had demanded a report after filing the civil fraud charges on Wednesday.
WorldCom's woes deepened, meanwhile, as it received notice from the Nasdaq Stock Market that its shares would be removed from trading starting Friday. The delisting could be put on hold if WorldCom requests a hearing to object to the move.
And WorldCom shareholders sued the company Monday in federal court in Mississippi, where it is based. The class-action lawsuit says shareholders paid artificially inflated prices for the stock because the company had failed to disclose significant adverse information in its financial reports.
In its statement, WorldCom said its audit committee is reviewing financial records for 1999 through 2001 because ``questions have been raised'' regarding significant changes in reserves against potential financial losses.
``No conclusion has been reached regarding these entries,'' said the statement. It gave a detailed account of the circumstances surrounding the discovery of the questionable accounting disclosed last week.
Companies use reserve accounts to set aside revenue to be used against predictable, upcoming costs, such as clients who don't pay bills or a pending lawsuit. Companies have a lot of latitude to reduce or increase those reserves, but they are not supposed to do it simply to make revenues look better.
``Today's filing is consistent with our pledge to be forthright and open, and to cooperate fully with both internal and external investigations,'' WorldCom President and Chief Executive Officer John Sidgmore said in a statement. ``We will continue to be proactive in reviewing our operations and reporting our findings. This company is absolutely committed to operating in accordance with the highest ethical standards.''
Former CEO Bernard Ebbers, who was recently ousted from the company, told members of the congregation Sunday at his Baptist church in Mississippi: ``I don't know what all is going to happen or what mistakes have been made. ... No one will find me to have knowingly committed fraud.''
Ebbers received more than $400 million in loans from WorldCom. He and Sidgmore have been subpoenaed to testify at a congressional hearing July 8.
WorldCom, second only to AT&T in the long-distance market, grew from a small telephone company into one of the telecom industry's biggest players through more than 60 acquisitions over the past 15 years -- notably its purchase of MCI Communications in 1998 for $30 billion.
WorldCom also said it had asked its auditor, KPMG LLP, to review its records for possible problems during the period. KPMG took over from Arthur Andersen LLP as the company's outside auditor in mid-May.
Andersen had approved the company's financial statements for 2001 and the first quarter of this year, which were the subject of the stunning restatement that roiled the stock market last week.
Before the report was made public, SEC Chairman Harvey Pitt said that ``criminal charges may be too good'' for those responsible for the WorldCom accounting scandal.
``We think the American public is entitled to a full accounting of what went wrong here,'' Pitt said on NBC's ``Today.''
``I don't want to prejudge any case but ... from what I've heard, I'm outraged. The American public is outraged. Criminal charges may be too good for the people who brought about this mess,'' Pitt said.
WorldCom, based in Clinton, Miss., disclosed last week that it misrepresented $3.8 billion in expenses to make earnings appear greater. The company has laid off thousands and seen its stock become almost worthless and is on the verge of bankruptcy.
The company's woes, coming on the heels of major accounting problems with Enron Corp., Andersen and Xerox Corp., has traumatized stock markets. Pitt said Sunday that if the WorldCom report is truthful ``and people get to know at least what the circumstances are, then we'll have an informed market, and there won't be insiders who can play games with the unsuspecting public.''
``If there's even an iota of false statement in there, people will pay heavily,'' Pitt said Sunday on ABC's ``This Week.''
President Bush appears to have left open the possibility of a criminal investigation, pledging Friday that the Justice Department will ``hold people accountable'' for mismanaging their companies through deceit and corruption.
``What we want is a much tougher set of rules that is subject to the SEC's oversight and jurisdiction, and that's the way we hope ultimately the Senate bill will go,'' Pitt said Sunday. ``I want the toughest, most pragmatic approach that we can take.''
Xerox Corp. announced Friday that it improperly recorded billions of dollars more revenue in the past five years than the SEC had estimated when it took enforcement action against the company this spring.
``We're not finished with the Xerox case,'' Pitt said. ``Everyone who may have been involved is still under investigation. And before much longer, we're going to make all of them responsible for what they've done.''
The SEC also is investigating Halliburton Co. for its accounting practices in 1998, when Vice President Dick Cheney was its chief executive.
You're right about the political leanings of the reporter...
The "Bernie and Scott" show is officially over until they resurrect in prison.....
NeverGore :^)
Andersen had approved the company's financial statements for 2001 and the first quarter of this year, which were the subject of the stunning restatement that roiled the stock market last week.
Great pickup on how the left wing maggots in charge of AP, and this leftie posing as a reporter, switched over to Haliburton to blame VP Chaney.
Do you ever get the feeling like the Coyote in the old Roadrunner cartoons, about three seconds after actually looking down at the abyss below, and about one second before holding up the little sign that says "Help Me!"?
Thanks for the advice; I've been contemplating buying some shares of Worldcom, but I've hesitated for the reason you mentioned--the likelihood of the stock hitting "0".
I'm still afraid, though, that I'm going to be kicking myself at some point in the near future for not getting in now.
I doubt it. Bankruptcy is unavoidable at this point, and I don't see them emerging from it, which means their stock will be worth ZERO.
A much better stock investment would be to start buying WorldCom's competitors, because they are the ones who will pick up the new business and profits.
Odd way of stating that, isn't it? Wouldn't the most direct statement be "I never committed fraud." ?
Remember a lot of these Rat ruined companies will not bounce back. They have fallen like they took a dive off of the Empire State Building. There will be a couple of dead cat bounces, don't get suckered into buying on a dead cat bounce.
Don't worry. Most papers have to cut AP articles to make them fit into whatever news space they have, so the last few paragraphs rarely make it in. And, of course, most people stop reading after the first few paragraphs anyway.
Nice thing is, while they're all at home, laid off, they will be available to hear a dozen telephone pitches a day! Revenge is sweet.
It will probably be delisted from Nasdaq.
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