Scott Sullivan, the former chief financial officer of MCI, is the latest top executive to plead not guilty in an Oklahoma criminal court to charges stemming from the bankrupt telephone company's $11 billion accounting scandal.

He was fingerprinted, photographed, and released after posting $50,000 bail. State Judge Russell Hall set a preliminary hearing conference for Sullivan for November 13.

Last month, Oklahoma attorney general W.A. Drew Edmondson filed a 15-count criminal complaint against Sullivan and five other former MCI executives — as well as the company itself — including charges that they violated state securities laws by defrauding investors, lied about company finances, and ran a business as a fraud.

The suit alleges that bogus financial statements produced by WorldCom Inc. — still the company's legal name — caused Oklahoma investors to lose large sums, including $64 million in state pension funds.

"These charges are unwarranted as a matter of law and unfair as a matter of practicality," said Sullivan's attorney Roy Black, according to Reuters. "We intend to prove that Mr. Sullivan responsibly reported accounting figures as a CFO of WorldCom" and was not responsible for the company's difficulties and the loss of WorldCom stock value," added Black, according to the Associated Press.

The other five MCI executives who have been charged include former chief executive officer Bernie Ebbers, former controller David Myers, former director of general accounting Buford Yates, former director of management reporting Betty Vinson, and former director of legal-entity accounting Troy Normand.

Each faces up to 10 years in jail and a $10,000 fine if convicted. Sullivan and four of the executives have also been charged in federal court.

You Can't Shelter Their Names, IRS Tells Grant Thornton
The Internal Revenue Service is turning up the heat on Grant Thornton, the fifth-largest accounting firm, as the government agency tries to crack down on abusive tax shelters.

The IRS asked a federal judge to require Grant Thornton to turn over the names of people and companies that bought what the government believes were abusive tax shelters, according to The New York Times.

Michael Friedman, an IRS supervisory agent, accused Grant Thornton of failing to respond to 23 summonses he issued in June and July 2002 seeking documents and testimony, the paper reported, citing court documents. The Times added that according to IRS commissioner Mark Everson, the government asked the court to force the company to cooperate because "lawyers and accountants have a clear and established obligation to comply with the law requiring registration of tax shelters."

In a statement, Grant Thornton reportedly responded that the court filing "comes as a total surprise to us, as we were given no advance notice that the matter was referred for summons enforcement." The accounting firm added that it had "fully cooperated with the IRS, having provided thousands of pages of documents in response to over 40 summonses from the IRS."

"We were not engaged in the promotion of abusive tax shelters," the statement said, "and are disappointed that the IRS has taken the extraordinary step of proceeding with a summons enforcement action without discussing the matter with us first."

The Timesnoted that the government has gone to court to enforce summonses issued to three other accounting firms — Arthur Andersen, BDO Seidman, and KPMG — as well as the Jenkens & Gilchrist law firm and the Diversified Group, a tax shelter promoter.

Earlier this week, the IRS and state tax officials announced the establishment of a new nationwide partnership to combat abusive tax avoidance. Under agreements with 40 individual states and the District of Columbia, the IRS will share information on abusive tax avoidance transactions, and those taxpayers who participate in them, with the participating states.

The agreements will allow the IRS and state agencies to avoid duplication and to piggyback on the results of each other's work, the IRS said in a press release, and "to enable both state and federal governments to move more aggressively in the fight to ensure all taxpayers pay their fair share."

The states and the IRS will also share information on any resulting tax adjustments, reducing the need for duplicating lengthy taxpayer examinations by both a state and the IRS.

FASB Seeks More Disclosure on Pensions
The Financial Accounting Standards Board has issued an exposure draft designed to improve company disclosures regarding defined benefit pension plans.

FASB said it plans to require that companies provide more details about their plan assets, benefit obligations, cash flows, benefit costs, and other relevant information. "The proposed disclosures will provide investors with greater visibility into plan assets and a clearer picture of cash requirements for benefit payments and contributions to fund pension and other postretirement benefit plans," said FASB project manager Peter Proestakes, in a statement.

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