Accounting woes at WorldCom total $7.1 billion after another $3.3 billion in problems found
Friday, August 9th 2002, 12:00 am
By: News On 6
NEW YORK (AP) _ The bad news about bankrupt telecommunications firm WorldCom Inc. has become $3.3 billion worse.
The company said Thursday that it had uncovered another $3.3 billion in bogus accounting, bringing the total to about $7.1 billion, and warned that it could find more accounting problems as it moves forward with its internal investigation.
WorldCom spokesman Brad Burns said the latest figures have already been reported to the Securities and Exchange Commission and won't affect the Clinton, Miss.-based 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.
The long-distance and Internet services company said it may write off $50.6 billion in goodwill and other intangible assets when it restates its finances to adjust for the accounting problems. That 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.
Because of the accounting problems, WorldCom said it would restate its financial statements for all of 2000, 2001 and the first quarter of 2002.
WorldCom filed for Chapter 11 bankruptcy protection on July 21, listing $107 billion in total assets and $41 billion in debts. It was the biggest bankruptcy filing in U.S. history.
Thursday's revelation came 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 has severely shaken investor confidence, pummeling stocks and pension funds.
The total impact of problems at WorldCom won't be known until accounting firm KPMG LLP finishes auditing the its financial statements for 2000-02, the company said.
Arthur Andersen LLP, the accounting firm convicted of criminal charges for shredding Enron audit documents, had been WorldCom's auditor until May.
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, former chief financial officer Scott Sullivan is believed to have used a variety of methods to bolster income, including counting reserves for bad debts as operating income.
Last week, Sullivan and former controller David Myers were arrested and charged with hiding 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 fraudulent accounting methods hasn't been determined.
Ebbers' attorney defended his client in an interview Thursday night with CNBC.
``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-based law firm. ``Accounting decisions are arcane. They're mysterious for people who are not trained in the science. Bernie Ebbers certainly was not.''