WorldCom's former controller, David Myers, pleaded guilty Thursday to conspiracy, securities fraud, and making false statements to the Securities and Exchange Commission. It's federal prosecutors' first conviction in the multimillion-dollar accounting scandal and provides them with ammunition in the cases they're building against more senior WorldCom executives.
The charges carry as much as 20 years in prison for Myers, who entered his guilty plea before Judge Richard Casey in U.S. District Court in Manhattan. In his plea, Myers didn't name other WorldCom executives, although he admitted to participating in fraudulent accounting carried out under the orders of more senior WorldCom execs and with the help of subordinates.
Federal prosecutors have charged former WorldCom CFO Scott Sullivan and Buford Yates Jr., the company's former director of general accounting, with securities fraud, conspiracy, and filing false statements with the SEC. Prosecutors have also named two other former WorldCom accounting executives, Betty Vinson and Troy Normand, as unindicted co-conspirators. Both Vinson and Normand are believed to be cooperating with the government.
The charging documents in the case against Myers state that beginning in or about October 2000, when it appeared that WorldCom would miss its earnings forecasts, "Sullivan instructed David F. Myers, the defendant, and his subordinates to falsely and fraudulently book certain entries in WorldCom's general ledger, which were designed to reduce WorldCom's reported line costs and thereby increase WorldCom's reported earnings. As Sullivan, Myers, Yates, Vinson, and Normand well knew, there was no justification in fact or under GAAP generally accepted accounting principles for these entries."
Prosecutors allege that the defendants concealed more than $7 billion in expenses in 2000 and early 2001, with the effect of improperly inflating WorldCom's profits by more than $5 billion.