Two more former WorldCom finance executives pleaded guilty for their role in the telecom giant's $7 billion fraud, which resulted in the largest U.S. bankruptcy in history.
Betty Vinson and Troy Normand, both certified public accountants who worked in WorldCom's general accounting department and assisted in the preparation of financial documents, pleaded guilty to one count of securities fraud and one count of conspiracy to commit securities fraud in Manhattan federal court. They also agreed to cooperate with prosecutors, according to reports.
Their pleas come just three days after former accounting director Buford Yates Jr. pleaded guilty to two felony charges, stating that he both conspired to commit and committed securities fraud.
Last month former WorldCom controller David Myers pleaded guilty to filing false documents with securities regulators, conspiracy to commit fraud, and securities fraud. He said he was directed by the company's senior management to falsify the books, according to reports at the time.
The feeling is that the feds are slowly trying to build a case against former chairman Bernie Ebbers and former CFO Scott Sullivan. Last month Sullivan pleaded not guilty to charges that he participated in WorldCom's fraud.
Vinson reported to Yates, who reported to Myers, who reported to Sullivan.
Vinson and Normand reportedly told U.S. Magistrate Judge Andrew Peck that their supervisors ordered them to falsify the financials with the goal of hiding expenses. "I came to believe these adjustments being made to WorldCom's financial statements contravened Generally Accepted Accounting Principles" and were meant to mislead investors and financial analysts, said Vinson, according to Bloomberg.
Vinson and Normand face a possible maximum prison term of 15 years, but they are expected to receive shorter sentences since they are cooperating. Vinson is scheduled to be sentenced on January 13, and Normand on April 10.
Sweetheart Deal for a Tyco Acquisition?
Did former Tyco International CEO Dennis Kozlowski forge a secret deal with Leon Hirsch, former CEO of U.S. Surgical, when the two companies agreed to merge in 1998?
The office of Manhattan District Attorney Robert Morgenthau seems to think it's possible. The prosecutor is investigating whether Kozlowski guaranteed a $14 million retention package to Hirsch in exchange for his agreement to the takeover, according to USA Today.
The inquiry is an outgrowth of the probe of Kozlowski and former Tyco CFO Mark Swartz, who were indicted last month for stealing millions of dollars from the conglomerate.
When Tyco bought U.S. Surgical in a $3.17 billion all-stock deal, Hirsch was named nonexecutive chairman of Tyco Healthcare Products Group, which absorbed his company.
Tyco paid Hirsch about $14 million through a $340,000-a-month retainer, according to the paper, citing a person close to the review. The paper also noted a Securities and Exchange Commission filing that shows Hirsch was scheduled to join Tyco's board; he never did.
Tyco paid $42.50 per share, well below the $50 per share that many analysts thought U.S. Surgical was worth at the time of the deal, according to the report. The paper added that William Patterson, director of the AFL-CIO's office of investment, questioned the deal's price tag at the time in a June 1998 letter to U.S. Surgical's board.
Patterson also questioned whether Hirsch's interest in his own job security at the time affected the board's decision-making process, and he urged U.S. Surgical's outside board members to seek higher bids, according to the USA Today article.
The paper said Morgenthau's office is exploring whether Hirsch facilitated the deal "because he knew what he was going to get."
For Many Companies, Option Play Turns into a Keeper
So much for the rush to expense options. Dozens of companies seemed to trip over one another this past summer, when the options issue became a hot topic, announcing plans to adopt such a policy.
It turns out that a lot of talk is turning into little action.
Just 8 percent of companies plan to begin expensing options within the next 12 months, according to a Deloitte & Touche survey of senior financial and human resources executives from 120 Fortune 1,000 companies with median revenues of $1.3 billion.
Another 53 percent of respondents are postponing any decision on the matter, while 35 percent do not intend to expense options unless mandated by legislation or regulatory changes.
The main reason companies are delaying their decision: they are unsure how to value options accurately.
Fully 49 percent of respondents are waiting for more clarification and standardization in the methodology for expensing stock options. In fact, when asked to identify the single most difficult issue regarding options expensing, 60 percent cited the need to determine a proper valuation methodology.
"While many companies remain on the fence, most need to make a decision about expensing options for 2003 by year-end," said Michael S. Kesner, partner in Deloitte & Touche's Performance Management and Compensation Practice, in a statement. "Despite the murkiness around valuation, another wave of prominent companies announcing plans to expense options, in addition to the Financial Accounting Standards Board's recent announcement about converging its standards with the International Accounting Standards Board's, could trigger an options-expensing Tsunami."
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