VideoIt's looking likely that WorldCom will restate the restating of its restatement.
Or at least that's the word from no less an authority than former Attorney General Richard Thornburgh. In a 118-page report filed with the U.S. bankruptcy court, Thornburgh indicated he expects the former telecom giant to add to the $7.68 billion in revisions the company has already made.
"We believe our investigation will reveal that there were improper and unsupported adjustments that go beyond the more than $7 billion in adjustments already restated," wrote Thornburgh, according to wire service reports.
Reuters said the third restatement could lower WorldCom's revenues by another $3 billion.
The bankrupt telecom giant, of course, has already admitted in two separate stages that it hid a total of $7.68 billion worth of expenses during the past few months. That tally already distinguishes WorldCom as the largest fraud in U.S. corporate history.
The report also apparently plays up the influence of former WorldCom chief executive Bernard Ebbers, noting that he "appears to have dominated" the course of the telecommunications company's growth, its agenda, and decisions by the company's board of directors, according to Bloomberg's account. "While Ebbers received more than $77 million in cash and benefits from the company, shareholders lost in excess of $140 billion in value."
Thornburgh, the special examiner charged to oversee WorldCom and report to the court, stressed that "a picture is clearly emerging of a company that had a number of troubling and serious issues" related to the "culture, internal controls, management, integrity, disclosures and financial statements of the company."
The document goes on to state: "Our investigation strongly suggests that WorldCom personnel responded to changing business conditions and earnings pressure by taking extraordinary and illegal steps to mask the discrepancy between the financial reality at the company and Wall Street's expectations."
The report apparently criticizes WorldCom's compensation committee for having "brief" meetings at which members, led by chairman Stiles Kellett Jr., deferred to Ebbers's recommendations. "It appears that the compensation committee did not critique or challenge compensation decisions presented by Mr. Ebbers," the report states, according to Bloomberg.
The 118-page bankruptcy court filing also fingers Kellett, asserting that he "engaged in conduct that, at a minimum, gave the appearance he was indebted to Mr. Ebbers." Kellett has already resigned from WorldCom's board, agreeing to pay the company $119,000 to resolve a dispute over his use of a company jet.
This summer, WorldCom fired chief financial officer Scott Sullivan. Sullivan has also been indicted in federal court on fraud and conspiracy charges.
In addition, four former finance executives have pleaded guilty to participating in the scheme and have agreed to help the government's investigation. They are Betty Vinson, Troy Normand, Buford Yates Jr., and David Myers.
Monday's report, which reviewed more than a million WorldCom documents, details dozens of controversial issues, including $408 million in loans made to Ebbers, WorldCom's insatiable acquisition spree, arcane accounting transactions, and the lack of vigorous audits by the company's outside accountants, Reuters noted.
Vivendi Feels the Regulators' Reach
Regulators and federal prosecutors are not restricting their investigations to U.S.-based companies.
At least two agencies—the U.S. Attorney's Office and the Securities and Exchange Commission—are investigating Vivendi Universal, the French media giant.
The probes come one week after prosecutors in France launched their own investigation of the Paris-based company's accounting.
The SEC, which has been conducting an informal inquiry, will be "coordinating its activities" with the U.S. Attorney's office, according to Vivendi. The company's management said it intends to cooperate fully with the investigations.
According to Bloomberg, French prosecutors will examine whether Vivendi published "false accounts to hide the true nature of its financial situation" in 2000 and 2001 during the tenure of former chairman Jean-Marie Messier. The wire service added that investigative magistrates will also check out whether Vivendi gave misleading forecasts for 2001 and 2002.
Vivendi's new management named PricewaterhouseCoopers LLP to investigate potential financial wrongdoing. The work "has not revealed any malfunction of a nature to bring the sincerity of the written financial information provided by Vivendi into question," the company's management reportedly stated in September.
Size Doesn't Matter
WorldCom. Vivendi. Lucent. Cigna.
These large, high-profile companies have dominated the business headlines of late—and all because of their bookkeeping. Such marquee corporates don't hold a monopoly on these sorts of fiascoes, however.
In the past few days, a number of lesser-known companies have also become embroiled in accounting controversies.
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