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Former Worldcom CFO Scott Sullivan is unable to pay any of the $13.5 million in disgorgement and civil penalties he had earlier agreed to, says the SEC.
Stephen Taub, CFO.com | US
July 27, 2006
Former Worldcom CFO Scott Sullivan — featured on a 1997 cover of CFO magazine as the highest paid CFO in the country — is now too poor to pay any penalties for his role in a fraud that led to the largest bankruptcy in US history.
The SEC announced final civil settlements Thursday with Sullivan, four former Worldcom accountants, and another former finance executive stemming from the fraud at the telecom company, which was renamed MCI and then acquired by Verizon in January. The SEC said that, pending court approval, it would waive payment of disgorgement and prejudgment interest and would not impose a civil penalty against Sullivan and two of the accountants — David Myers and Buford Yates, Jr. — based on their demonstrated inability to pay.
Sullivan earlier had agreed to be liable for $10 million in disgorgement, representing a retention bonus, and $3,591,889 in prejudgment interest. Yates had consented to the entry of a final judgment holding him liable for $263,809 in disgorgement, representing a retention bonus and other payments, and $94,757 in prejudgment interest.
The other two accountants — Betty Vinson and Troy Normand — are not liable for disgorgement, according to the SEC, because neither received ill-gotten gains from their participation in the fraud. The SEC is not seeking civil penalties against Vinson or Normand, who also have no funds to pay them, the SEC said.
The SEC also settled civil fraud charges against Mark P. Abide, WorldCom's former director of property accounting for his role in the fraud and for illegally selling WorldCom stock based on inside information.
He agreed to pay $57,947 in disgorgement, prejudgment interest of $12,912 and an insider trading penalty of $57,947. Abide also agreed to be suspended from practicing before the Commission as an accountant, but can seek reinstatement after five years.
Abide is accused of making improper accounting entries into WorldCom's depreciable asset accounts — and ordering others to do the same — in order to conceal improperly capitalized expenses. While the fraud was being carried out, Abide is alleged to have sold 6,728 shares of WorldCom stock, representing 99 percent of his total holdings, to avoid losses of nearly $58,000.
Myers, WorldCom's former controller, was found liable for about $1 million in disgorgement, representing bonuses he received. On Wednesday, however, the US District Court for the Southern District of New York waived this payment and did not impose a civil penalty based on his inability to pay.