WorldCom Fraud Information

WorldCom Fraud Information

In June 2002, Securities and Exchange Commission (SEC) lawyers filed civil fraud charges against WorldCom for what would later be estimated at over $9 billion worth of accounting errors. When was the fraud discovered? While the current suit wasnt filed until June 2002, it is apparent that some in the public were aware of illegal practices at WorldCom over a year earlier. A previous lawsuit was filed in June 2001 by several WorldCom shareholders, only to be thrown out. That suit included testimony from a dozen former WorldCom employees, detailing the same problems that would eventually bring about the companys downfall. How was the fraud committed? Financial executives at WorldCom exercised various methods of hiding expenses for a period of more than two years between 2000 and 2002. They delayed reporting some expenses and misrepresented others to give investors the appearance of growth during secretly hard times. What is the current status of the case? The Justice Department has brought criminal charges against several company executives, four of which have pled guilty. Meanwhile, the SEC continues to pursue the civil case that it filed in June. So far, they have uncovered more than $9 billion in erroneous accounting. This has led to a partial settlement for an undisclosed fine and the right to continued government oversight of company operations. The court-appointed monitor for WorldComs affairs, Richard Breeden, said that this settlement represents a step in the right direction, but expects more company resignations as the case is pursued further. Former chief financial officer Scott Sullivan maintains his innocence in

the face of an indictment, and other executives are suspected but have yet to be charged directly.

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