VideoWorldCom Inc.'s former controller, David Myers, who was arrested earlier this month, reportedly told an accountant in the company's U.K. office to stop talking to auditors at Arthur Andersen.
On Jan. 22, Myers sent an E-mail to staff accountant Steven Brabbs. In that memo, Myers reportedly told Brabbs: "Don't have any more meetings with" Andersen, WorldCom's independent auditor at the time. The E-mail was released on Monday by the House Financial Services Committee, which is investigating the company's bankruptcy and its misreporting of $7.2 billion in operating costs.
The message to Brabbs continues: "I spoke to AA this morning and hear that you are talking about asset impairments and facilities. I do not want to hear an excuse. Just stop. Don't make me ask you again."
Bloomberg News reports that the message was part of a campaign by executives at WorldCom's Clinton, Miss., headquarters to restrain lower level employees who questioned the company's accounting practices.
Brabbs apparently first raised questions about the company's financial statements two years ago, when he was director of international finance and control in WorldCom's London office, Bloomberg reported. According to Brabbs, the telco's U.S.-based executives revised the first quarter 2000 statements for the company's U.K. operations by lowering the costs of maintaining phone lines by $33.6 million.
Reportedly, Brabbs was also pressured by former CFO Scott Sullivan to alter the books for the second quarter of 2000. It's not clear what Sullivan allegedly asked Brabbs to do.
Both Sullivan and Myers were arrested on Aug. 1 and charged with securities fraud.
(Editor's note: To read an exclusive interview with WorldCom internal auditor Glyn Smith, see "The View From Inside.")
Citi: We Gave WorldCom Execs IPO Shares
In response to a subpoena from the U.S. House Financial Services Committee, Citigroup Inc. has acknowledged that its investment banking arm, Salomon Smith Barney, set aside shares of hot IPOs to executives from WorldCom Inc.
"The IPO allocations to WorldCom officers and directors at issue here were reasonable since these were high net worth individuals and substantial retail clients," Citigroup lawyer Jane Sherburne said in a letter sent to the committee on Monday afternoon, according to Reuters.
But Bloomberg News reported that Sherburne also wrote that some of the share allocations, although lawful, "were sufficiently large enough to raise questions about the appearance of conflicts."
In addition, Sherburne wrote that new rules governing the IPO process may be required.
Surprise! Creditors Want Kopper's $12 Million
Michael Kopper may have settled his case with the Department of Justice, but his legal problems are far from over. On Monday, Enron Corp.'s creditors filed a lawsuit in federal bankruptcy court in New York seeking the $12 million he agreed to turn over to the U.S. government, Bloomberg News.
Kopper, the former managing director of Enron Global Finance, and a close colleague of the company's former CFO Andrew Fastow, pled guilty a week ago to two counts of conspiracy. As part of his settlement, he agreed to disgorge the $12 million he made from Enron's off-balance partnerships.
But apparently, the creditor's committee wants to get that money before Kopper turns it over, Bloomberg reported. The panel is claiming that they are owed as much as $50 billion. The bankruptcy court scheduled a hearing in New York on Wednesday.
NYSE Chairman Didn't File Right Papers
In the wake of the rash of corporate scandals, few institutions have raced as quickly as the New York Stock Exchange to establish new standards for corporate governance and board independence. Indeed, the NYSE's chairman Richard Grasso has been outspoken about the need for better behavior by corporate executives.
But Grasso himself apparently needs to pay a little more attention to his own accounts. As a board member of Computer Associates International Inc., a company which itself is being questioned about its accounting practices, Grasso reportedly failed to submit the proper documentation about his holdings to the SEC.
Bloomberg News reported that Grasso and four other directors relied on CA's counsel for instructions on filing the shares they receive as compensation for being board members. In Grasso's case, the errors go all the way back to 1996. The NYSE Chairman corrected the mistake with an amended filing this month, but CA noted the error in its recent annual proxy statement.
SEC Investigates U-Haul For Dumping PwC
U-Haul International Inc., a unit of Reno, Nev.-based holding company Amerco, is being investigated by the SEC for firing PricewaterhouseCoopers as its auditor, FT.com reported. The company has admitted to material weaknesses in its internal controls.
U-Haul dismissed PwC last year after 24 years of using the Big Five firm as its outside auditor. The new auditor is BDO Seidman.
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