WorldCom: Bush promises investigation; SEC charges fraud
While much of the economic industry is still spinning from WorldCom Inc.'s announcement that it misreported nearly $4 billion in expenses, the government has been swift to take action.
After hearing the news, President George W. Bush vowed that the matter would be "fully" investigated. "There is a need for a renewed corporate responsibility in America," he said.
The Securities and Exchange Commission has wasted no time, filing civil fraud charges in the U.S. District Court in New York. In its filing, the Commission said WorldCom made itself seem more profitable that it was. "In a scheme directed and approved by its senior management, WorldCom has disguised its true operating performance by using undisclosed and improper accounting." WorldCom inflated its 2001 earnings by $3 billion and its first-quarter 2002 earnings by $797 million, according to the SEC. WorldCom has disclosed that it reported $3.8 billion in expenses as capital expenditures, and plans to restate its results for full-year 2001 and first-quarter 2002.
The suit seeks to prevent WorldCom from altering any documents or offering any payouts to WorldCom executives while the SEC investigates. Financial penalties are expected to be part of the suit.
The SEC also used its authority to demand WorldCom file a detailed report of the misreporting. The report will be created under oath, before the market opens on Monday.