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WorldCom to Restate Earnings NewsMax WiresCLINTON, Miss. – WorldCom faced bankruptcy Tuesday after announcing one of the largest accounting frauds in U.S. corporate history and firing its chief financial officer. Shares of WorldCom plunged more than 70 percent in after-hours trading. The company said it would restate its financial results for all of 2001 and the first quarter of 2002 to take almost $3.8 billion in cash flow off its books, wiping out all profit over the five quarter period. WorldCom also dismissed CFO Scott Sullivan while David Myers, senior vice president and controller, was allowed to resign. "Our senior management team is shocked by these discoveries," said John Sidgmore, WorldCom's chief executive officer, in a statement. "We are committed to operating WorldCom in accordance with the highest ethical standards." Sidgmore said the company has notified the Securities and Exchange Commission of these events. The SEC could not be reached for comment. The beleaguered telecommunications giant boosted its cash flow and profits over five quarters by wrongly booking billions of dollars in line cost expenses as capital expenditures. The bookings, which did not conform to Generally Accepted Accounting Principles, included transfers between internal accounts of $3.06 billion in 2001 and $797 million in the first quarter of 2002. Accounting firm Andersen LLP had audited the company's 2001 financial statements and reviewed WorldCom's books for the 2002 first quarter. The company recently hired KPMG LLP to undertake a comprehensive audit of the firm's financial statements. Sidgmore said the company would issue unaudited financial statements for 2001 and for the first quarter of 2002 as soon as practicable. When the audit is completed, the company will provide new audited financial statements for all required periods. "I want to assure our customers and employees that the company remains viable and committed to a long-term future," Sidgmore added. "Our services are in no way affected by this matter, and our dedication to meeting customer needs remains unwavering." In after-hours trading, WorldCom lost 36 cents a share on the Instinet system from a close of 83 cents on the Nasdaq stock market. Before Tuesday's new low, shares of WorldCom have traded between 87 cents and $16.06 in the last 52 weeks. Shares of WorldCom have been hammered in recent months over investor concerns about its debt load and in the spring its longtime CEO Bernie Ebber stepped down. Sidgmore replaced Ebber on April 29, 2002.
Copyright 2002 by United Press International. All rights reserved.
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