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Your support makes all the difference.An investigation by WorldCom's board of directors uncovered nearly 3.8 billion US dollars (£2.5 billion) in improperly booked expenses, the US telecommunications giant said, revealing what appears to be among the largest cases ever of accounting fraud.
In the wake of the Enron scandal, the fraud is bound to unsettle stock markets on both sides of the Atlantic. In London, the FTSE 100 index fell 135 points in the opening two minutes, but was at about the same level two hours later.
The company could face bankruptcy, bringing an uncertain future to about 2,500 UK workers, most of whom work at the firm's UK bases in Reading and Cambridge.
WorldCom's chief financial officer, Scott Sullivan, who is also a director, has been sacked, the company said yesterday. The company's accounts were overseen by Andersen, the company involved with the collapsed Enron energy group.
More than 3 billion dollars (£1.9 billion) of expenses in 2001 and 797 million dollars (£530 million) for the first quarter of 2002 were wrongly listed on company books as capital expenditures, the company said, and thus not reflected in its earnings results. It will restate earnings for all of 2001 and the first quarter of 2002.
"Our senior management team is shocked by these discoveries," John Sidgmore, who was appointed WorldCom's chief executive officer on April 29, said. "We are committed to operating WorldCom in accordance with the highest ethical standards."
Mr Sidgmore replaced former president and CEO Bernie Ebbers, who resigned amid questions about the company's growth and its finances.
WorldCom grew from a small long-distance company into a telecommunications force through more than 60 acquisitions in the past 15 years. The rapid-fire growth was stopped dead in its tracks in 2000 when federal and European regulators blocked WorldCom's proposed merger with Sprint, citing competition concerns.
The revelation adds Worldcom to a growing list of companies struck by accounting scandals, led by Enron, that have shaken public faith in business and Wall Street and created a flood of shareholder lawsuits.
WorldCom said it will also begin cutting its work force by 17,000 jobs starting on Friday.
WorldCom, the US's second biggest long-distance provider, said it notified its auditors, KPMG, and asked it to conduct a comprehensive audit of the company's financial statements for 2001 and 2002.
The company said it notified Arthur Andersen, which had audited the company's financial statements for 2001 and for first quarter of 2002.
Andersen, convicted of obstruction of justice recently in the Enron scandal, said its work for WorldCom was in compliance with SEC standards.
"It is of great concern that important information about line costs was withheld from Andersen auditors by the chief financial officer of WorldCom. The WorldCom CFO did not tell Andersen about the line cost transfers nor did he consult with Andersen about the accounting treatment," the company said.
Andersen said it told WorldCom that the company's 2001 financial statement "should not be relied upon".
The news could be a body blow to WorldCom, which is reeling from a low stock price, a crumbling telecoms market and an ongoing Securities and Exchange Commission investigation.
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