WorldCom Uncovers Another Accounting Problem, Bringing Total To $7.1 billion - WLOX.com - The News for South Mississippi

WorldCom Uncovers Another Accounting Problem, Bringing Total To $7.1 billion

WorldCom Inc. uncovered another $3.3 billion in bogus accounting, bringing the total to some $7.1 billion. The company also said it could find more accounting problems as it moves forward with its internal investigation.

The announcement Thursday night was the latest in a series of accounting scandals that have plagued American business this year. Clinton, Miss.-based WorldCom, the parent of MCI, the country's second-biggest long distance company, also said it may write off $50.6 billion in goodwill and other intangible assets when it does restate its finances to adjust for the accounting problems. If it does, it would be one of the biggest such write-offs in U.S. corporate history.

The company previously reported finding $3.8 billion in accounting irregularities for 2001 and the first half of 2002. The latest discovery was made as the company reviewed its books for 1999 and 2000, with most of it tallied in 2000. As a result, WorldCom said it would restate its financial statements for all of 2000, 2001 and the first quarter of 2002.

WorldCom, the once high-flying long-distance and Internet services company, filed for Chapter 11 bankruptcy protection July 21 with the company listing $107 billion in total assets and $41 billion in debts. It was the biggest bankruptcy filing in U.S. history.

Thursday's additional restatement comes amid a string of accounting scandals that has tarnished some of the nation's largest firms, felling once mighty companies like Enron and Global Crossing. The fallout from the revelations of corporate malfeasance has severely shaken investor confidence, pummeling stocks and pension funds.

WorldCom spokesman Brad Burns said the figures announced Thursday have already been reported to the Securities and Exchange Commission and that the additional findings won't impact the company's ability to keep operating.

"The company identified the financial issues to the investigative authorities and we are working hard to get the company back on solid financial footing,'' Burns said.

Burns said investors and creditors should be aware that additional amounts of improperly reported pretax income and earnings before interest, taxes, depreciation and amortization could be discovered and announced. He said the company issued the warning as part of its policy of being "open and forthright.''

Arthur Andersen LLP had been WorldCom's auditor until May. KPMG LLP is now auditing WorldCom's financial statements for 2000-2002. Until that is finished, the total impact won't be known, the company said.

The accounting fraud that occurred in 2000 is said to differ from the techniques used in 2001 and 2002, according to a report Thursday by the financial news network CNBC. In the latest case, the report said, Sullivan is believed to have used a variety of techniques to bolster operating income, including reversing reserves for bad debts into operating income.

Last week, two former executives - chief financial officer Scott Sullivan and controller David Myers - were charged with hiding the nearly $4 billion in expenses and lying to investors and regulators in a desperate bid to keep the company afloat. But whether the company's former chief executive, Bernard Ebbers, had knowledge of the deceptive accounting hasn't been determined. In an interview Thursday night with financial news network CNBC, Ebbers' attorney said his client had nothing to do with the decisions made at the company.

"I'm certain of this. When the investigation is done, there will not be a shred of credible evidence that Bernie Ebbers had a thing to do with those (accounting) decisions,'' said Reid Weingarten of Steptoe & Johnson LLP, a Washington, D.C-based law firm. "Accounting decisions are arcane. They're mysterious for people who are not trained in the science. Bernie Ebbers certainly was not.''

Powered by Frankly