USA: TWO FORMER WORLDCOM EXECUTIVES APPEAR IN COURT SHACKLED AND HANDCUFFED AND FLANKED BY FBI OFFICIALS

Record ID: 837765

  • Title: USA: TWO FORMER WORLDCOM EXECUTIVES APPEAR IN COURT SHACKLED AND HANDCUFFED AND FLANKED BY FBI OFFICIALS
  • Date: 2nd August 2002
  • Summary: (U7)NEW YORK CITY, NEW YORK, UNITED STATES (AUGUST 1, 2002) (REUTERS) MV STEVE SULLIVAN, FORMER WORLDCOM CHIEF FINANCIAL OFFICER BEING LED OUT OF FBI BUILDING BY OFFICIALS MV DAVID MYERS, FORMER WORLDCOM CONTROLLER, BEING LED OUT OF BUILDING BY OFFICIALS; SCU MYERS IN HANDCUFFS; MV MYERS GETTING INTO CAR; SLV CARS DRIVING AWAY (3 SHOTS) SLV FEDERAL COURTHOUSE; SCU COURTHOUSE SIGN; SLV POLICE OUTSIDE COURTHOUSE (3 SHOTS)
  • Embargoed: 17th August 2002 13:00
  • Keywords:
  • Location: NEW YORK CITY, NEW YORK / WASHINGTON DC / CLINTON, MISSISSIPPI, UNITED STATES
  • City:
  • Country: USA
  • Topics: Crime,Communications,Economy,Politics
  • Reuters ID: LVABOUU4OZ6LTSQH6FRUDDBE16A9
  • Aspect Ratio:
  • Story Text: Shackled in handcuffs and flanked by FBI officials, two former WorldCom executives appeared in court Thursday facing charges of securities fraud, which could see them facing years in jail and hefty fines if convicted. The pair have now been released on bail set at millions of dollars.
    Former Chief Financial Officer Steve Sullivan and former controller David Myers were arrested on Thursday (August 1, 2002), for their role in the $3.85 billion accounting scandal that ended in the largest bankruptcy in U.S. history and rocked confidence in corporate America.
    A week after executives from cable operator Adelphia Communications Corp. were led away in handcuffs, the scene was played out again as Sullivan and Myers took that same long walk in front of a battery of television cameras and surrendered to federal authorities in New York.
    Sullivan and Myers are facing seven counts of fraud each for their alleged role in the nearly $4 billion accounting scandal. The pair face one count of conspiracy to commit securities fraud, one count of securities fraud, and five counts of making false filings with the Securities and Exchange Commission.
    Sullivan and Myers were later released on bail -- set at $10 million and $2 million respectively. Both men had their passports seized and were given a series of travel restrictions.
    The men were led into federal custody in downtown Manhattan just two days after President George W. Bush signed into law sweeping legislation designed at curtailing fraud in corporate America. Commenting on the arrests, U.S. Attorney General John Ashcroft told reporters: "When financial transactions are fraudulent and balance sheets are falsified, the invisible hand that guides our market is replaced by a greased palm. Information is corrupted, trust is abused, and the state of the market dissolves into a state of nature where the ruthless and corrupt profit at the expense of the truthful and law-abiding."
    After the arraignment in Manhattan federal court, Sullivan's lawyer blamed the charges on politics. He said his client would vigorously contest the allegations and that he expected a trial would be held.
    "We expect that there will be a trial here and we will defend ourselves vigorously against the charges that were made today and we are looking forward to that trial which we hope will be handled in a climate that is not tainted by the current political climate," defense lawyer Irvin Nathan told reporters.
    If convicted, the men could face a prison term of up to five years and a $250,000 fine on the one conspiracy count and 10 years and a $1 million fine on each of the fraud and false filings counts.
    The complaint alleges that the two men were involved in an accounting scheme that began in early 2001 and lasted through June 2002 aimed at hiding expenses to artificially inflate earnings to meet Wall Street expectations.
    As part of the scheme, they allegedly hid information from the company's external auditor, Andersen, and from the SEC.
    White collar crime analyst, Martin Pollner said it is important for the public to see the former WorldCom executives being bought to court.
    "I think that corporate greed has infected the boardroom and I think with some convictions and people going to jail, I think that would be a wonderful curative effect." said Pollner.
    The scandal at WorldCom, coming after the collapse of energy trader Enron Corp., fanned a political firestorm that led to the legislation signed on Tuesday.
    The new law, designed to make it harder for executives to deceive investors, was spurred by weak stock markets, voter anger, and approaching congressional elections.
    The arrests of the WorldCom officials is just the most recent sorry chapter for corporate America in the past year.
    In late July, several members of Adelphia's founding Rigas family were arrested for, among other things, looting company funds.
    Also, ImClone Systems' former Chief Executive Sam Waksal was arrested in June for insider trading.
    The many scandals have so incensed investors and battered confidence in the stock markets that some stockholders appear to be reaching the boiling point.
    For its part the New York Stock Exchange on Thursday moved forward with efforts to overhaul corporate governance as its board approved a sweeping package of proposed rule changes for its listed companies.
    The approved recommended changes, still subject to regulatory approval include the most controversial proposal requiring shareholder approval of all stock option plans.
    NYSE Chairman Richard Grasso said: "I think that's an important message that the American consumer and the American investor need to hear. Very simply many of you have heard me say it to the point off your ears bleeding, if you rob a bank in this great country you go to jail. If you rob the shareholders you should go to jail."
    The proposals will now be sent tot he U.S. Securities and Exchange Commission for review. If they are given final approval, the new rules will apply to the roughly 2300 U.S.
    companies that are listed on the Big Board.
    WorldCom filed the world's largest bankruptcy in July as it buckled under $40 billion in debt and the accounting scandal.
    The company fired Sullivan in July, alleging he orchestrated the accounting debacle. Chief Executive Bernie Ebbers resigned under pressure in April.
    In today's WorldCom criminal complaint, the company itself was not charged. WorldCom was, however, sued previously by the SEC for alleged accounting fraud.
    WorldCom shares were trading at about 15 cents on Thursday afternoon.
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