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Thursday, June 27, 2002
nati
THE BATTAI;
Latest accounting scandal
puts WorldCom on brink
JACKSON, Miss. (AP) —
WorldCom Inc., the nation’s No.
2 long-distance company, slid
toward bankruptcy Wednesday
after disclosing what could be
the biggest case of crooked
accounting in U.S. history, and
President Bush vowed to “hold
people accountable.”
The news, disclosed late
Tuesday, sent telecommunica
tions stocks and other shares
plunging on Wall Street. It was
the latest in a series of account
ing scandals that have shaken
investors’ faith in corporate
America.
Bush said he was “deeply
concerned” about some of the
accounting practices in corpo
rate America and called “outra
geous” the disclosure that
WorldCom had hidden $3.8
billion in expenses.
“We will fully investigate
and hold people accountable for
misleading not only sharehold
ers but also employees as well,”
he said at an economic summit
in Alberta, Canada.
Bush said the Securities
Exchange Commission would
investigate, and the Justice
Department could step in. The
SEC had already been looking
into lending and accounting
practices at the Mississippi-
based company, which owns the
MCI telephone company.
Analysts said the former
Wall Street darling could
declare bankruptcy within the
week as lenders call in millions
in loans. WorldCom said it will
start laying off 17,000 people —
about 20 percent of its global
work force — on Friday.
“If loans are called, in order
to avoid an immediate shut
down, leaving lots of customers
in the lurch, they’d have to file
for bankruptcy,” said Alec
Ostrow, a partner in the bank
ruptcy law firm of Salomon,
Green & Ostrow in New York.
The Dow Jones average fell as
much as 200 points and slipped
below 9,000 for the first time
since October before recovering
to post only a slim loss. The
Nasdaq traded below its post-
Sept. 1 1 closing low but also
rebounded to record a small gain.
Trading was halted in the two
Crooked accounting puts WorldCom on brink
In a statement Tuesday. WoridCom said its board of directors had (bund $3.8 billion was wrongly listed
on its books as capital expenses in 2001 and 2002. That means WorldCom may have actually lost
millions of dollars when it reported profits.
Stock price
$50
MJJASONDJFMAMJJASONDJFMAMJ
SOURCES: Associated Press: Yahoo.com; Commodity Systems Inc.: Quote.<
stocks representing WorldCom’s
business. WorldCom Group,
which represent the company’s
data and commercial telecom
munications services, last traded
at 83 cents, down from a 52-
week high of $ 16.06. MCI Group
stock, which tracks its consumer
long-distance business, last trad
ed at $1.68, down from a high of
$17.33 in the last year.
In a statement Tuesday,
WorldCom said its board of
directors had found $3.8 billion
was wrongly listed on its books
as capital expenses in 2001 and
2002. That means WorldCom
may have actually lost millions of
dollars when it reported profits.
John Sidgmore, who was
appointed WorldCom’s chief
executive on April 29, said the
board was “shocked” by what
it found.
The company said it had
fired Scott Sullivan, its chief
financial officer. Sullivan could
not be reached for comment; his
telephone number in Boca
Raton, Fla., was not published.
Arthur Andersen, which was
WorldCom’s accountant during
the period in question, said its
work was in compliance with
SEC standards, and it suggested
Sullivan was to blame.
“Important information about
line costs was withheld from
Andersen auditors by the chief
financial officer of WorldCom,”
Andersen said in a statement.
Andersen is already consid
ered doomed. The accounting
firm was convicted earlier this
month of obstruction in the
Enron debacle and has lost
scores of clients.
WorldCom’s sudden fall
comes at a time when the nation
is dealing with a rash of corpo
rate scandals, from Enron to
Tyco International, Global
Crossing and Adelphia
Communications, which filed
for bankruptcy Tuesday.
Menos Infinity
olum
Senior animal science major Megan
Cutting studies for a test while relaxing in
the Menos Infinity sculpture in the
Halbouty and engingeering courtyard
Wednesday afternoon. The sculpture, which
RANDAL FORI) • THE BATTALC
was created in 1992 by Hans Van:
Bovenkemp, is named Menos which me."
spirit. The twenty-six foot tall sculpture
designed to embody a sense of sta
and endlessness.
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