Sullivan, Yates Plead Not Guilty

As expected, WorldCom's former chief financial officer, Scott Sullivan, and former director of general accounting, Buford Yates, pleaded not guilty to charges that they participated in one of the largest accounting scandals in U.S. history.

Sullivan was released on a personal recognizance bond of $10 million while Yates was released on a personal recognizance bond of $500,000.

Both men were named in a seven-count indictment last week, including one count of securities fraud, conspiracy to commit securities fraud, and fraud in connection with the purchase or sale of securities. They were also charged with three counts of making false filings with the Securities and Exchange Commission.

Prosecutors reportedly said they are continuing their investigation and that more charges are likely.

"The government is continuing its investigation and we do plan to supersede at some point to add charges to the same scheme and potentially to add defendants," U.S. Assistant Attorney David Anders told U.S. District Judge Barbara Jones, according wire services.

WorldCom's ex-controller David Myers is currently negotiating a plea deal. Betty Vinson and Troy Normand, two other WorldCom executives, are also reportedly discussing plea bargains with the government.

Myers, Normand, and Vinson last week were named as unindicted co-conspirators in the WorldCom case.

Management at the now-bankrupt telco has admitted the company misreported $7.2 billion in expenses since 1999.

Before their brief court appearance, Sullivan and Yates shook hands. The two then sat down at opposite ends of the defense table, according to Bloomberg's.

Old College Try: Ex-J.P. Morgan Exec Pleads Guilty in Columbia Scam
In yet another scandal involving a finance executive, a former J.P. Morgan Chase assistant treasurer reportedly pleaded guilty to conspiring with two Columbia University employees to embezzle $4.5 million from the bank.

Jacqueline McTair, 69, apparently admitted using her position at the banking giant to make unauthorized withdrawals from Columbia's accounts.

McTair is said to have pleaded guilty to counts of bank fraud, money laundering and embezzlement.

Under the plea agreement, McTair is expected to receive a 10-year jail term when she is sentenced Dec. 12, according to the report.

Prosecutors charged that McTair, along with Ingrid Rijos and Veronica Bowes, who worked in the university's student-services department, falsified phony slips to make it seem like they deposited $2.5 million. Instead, they kept the money.

McTair allegedly processed the phony documents and deducted the money from Columbia's accounts.

Rijos and Bowes were indicted last month. Their case is continuing.

Another Brick in the Wall: AICPA Urges Reform
The head of the largest industry association for accountants yesterday urged its members to work hard to clean up their reputation.

"What is needed is not just reform of the accounting laws, it is a rejuvenated accounting culture, both internally in corporate finance offices and externally in audit firms," said American Institute of CPAs (AICPA) President and CEO Barry Melancon in a speech made to a forum convened by the Yale Graduate School of Management.

"The culture must build upon the profession's traditional values," said Maelancon. "We are determined to demonstrate that auditors can and indeed do say 'no.' Because only if auditors are fully prepared to say 'no' to management will investors be fully prepared to say 'yes' to the markets."

Melancon noted that the recent accounting scandals have been painful to most auditors and CPAs. He said the vast majority of accountants provide sound, objective judgments and advice.

"But, hundreds of thousands of good 'apples' do not excuse the behavior of a few bad ones," he added. "Make no mistake about it; our profession was part of the problem and it came to embody the public's perception of the problem. Now we intend to be a part of the solution."

Melancon also said that the AICPA, in conjunction with the University of Texas at Austin and the Association of Certified Fraud Examiners, will establish an Institute for Fraud Studies. That Institute will seek to enhance investor education and to examine ways investors can help protect themselves against fraud.

Yesterday, the AICPA also took a few initiatives in the area of fraud detection:

• The institute announced it plans to introduce by next June new anti-fraud criteria and controls intended for public corporations.
  
  

• The industry association also said it is urging stock exchanges to mandate effective anti-fraud training for management, boards of directors, and audit committees and will make available training to directors and other corporate officials free of charge.
  
  

• AICPA is calling on its auditing standards board to enhance existing attestation standards for CPAs to test and report on client anti-fraud controls and criteria and to develop ways to communicate the results to the public.
  
  

• The institute is initiating discussions with the American Accounting Association, the Federation of Schools of Accountancy, university programs, and college textbook authors to find ways to incorporate anti-fraud education in programs and text materials.
  
  

The AICPA also said it is working to achieve more transparent financial reporting by calling on the auditing standards board to revise existing internal control and reporting standards. Those revisions would likely include advising companies to split the positions of chairman of the Board and CEO, and to mandate corporate anti-fraud education and a corporate ethical code of conduct.

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