Second WorldCom executive pleads guilty in deal with prosecutors

Monday, October 7th 2002, 12:00 am

By: News On 6

NEW YORK (AP) _ A former WorldCom accounting executive pleaded guilty Monday to securities fraud and conspiracy, and agreed to cooperate with investigators against his bosses in one of the biggest cases of crooked corporate accounting in U.S. history.

Buford Yates, 46, said he was instructed by supervisors to misreport expenses, allowing WorldCom to overstate earnings by $5 billion between October 2000 and April 2002.

``I came to believe that the adjustments I was being directed to make in WorldCom's financial statements had no justification and contravened generally accepted accounting principles,'' Yates said in federal court.

``I concluded that the purpose of these adjustments was to incorrectly inflate WorldCom's reported earnings in order to meet the expectations of securities' analysts and mislead the investing public,'' said Yates, 46, who was WorldCom's director of general accounting.

Prosecutors say Yates carried out orders by chief financial officer Scott Sullivan to hide $3.8 billion in expenses to make the telecommunications giant appear profitable.

Yates told U.S. Magistrate Judge Andrew Peck he knew the wrong information would be reported to the Securities and Exchange Commission and relayed to the public.

Peck said he would recommend that a federal judge accept the plea. Yates faces 10 years in prison on the conspiracy charge and a $1 million fine at sentencing Jan. 9. The SEC also filed a civil lawsuit against Yates for his role in the scheme.

Yates is the second WorldCom executive to plead guilty in the scandal.

David Myers, WorldCom's ex-controller, pleaded guilty in September to securities fraud, saying he was instructed by senior management to falsify ledgers.

Yates' lawyer, David Schertler, said his client had argued against the accounting tricks, but was overruled by superiors.

``When he raised those objections, he was told they had been approved by the highest levels of WorldCom management,'' Schertler said outside court.

The lawyer would not say if that included former CEO Bernard Ebbers, who is under investigation but has not been charged in the case. Ebbers has denied any wrongdoing.

Two other accounting executives who worked under Yates are expected to plead guilty as part of cooperation deals with authorities, according to court papers.

Prosecutors say those executives, Betty Vinson and Troy Normand, carried out orders from Sullivan and Myers to hide the $3.8 billion in operating expenses as capital expenses.

``As Sullivan, Myers, Yates, Vinson, and Normand well knew, there was no justification in fact or under generally accepted accounting principles for these entries,'' the indictment said.

Since the accounting mess first came to light, WorldCom officials have said roughly $7 billion was misreported, and reports have pinned the final figure as high as $9 billion.

Sullivan, who is free on $10 million bond, has maintained his innocence. He is under increasing pressure to cooperate after the actions taken by Yates and Myers, and the expected pleas by Vinson and Normand.