July 02, 2002, 5:18 PM — WorldCom Inc. is committed to transparency and to rehabilitating itself, John Sidgmore, the company's president and chief executive officer, said Tuesday, one week after the announcement that the telecommunications giant would have to restate its earnings for 2001 and the first quarter of 2002 after discovering accounting issues that totalled nearly US$4 billion.
"These have been very, very difficult times," Sidgmore said at a press conference at the National Press Club in Washington, D.C. "There has been an understandable outpouring of outrage and anger."
Sidgmore pledged that WorldCom, based in Clinton, Mississippi, would "release everything we know when we know it" over the course of its investigation into the matter.
On June 25, WorldCom announced that due to the inappropriate booking of some expenses as capital accounts, it would have to restate its earnings for 2001 and the first quarter of 2002. At the same time, the company also announced the firing of Chief Financial Officer Scott Sullivan and the resignation of Senior Vice President and Controller David Myers.
WorldCom has since been the subject of a handful of lawsuits from the government and from shareholders, as well as the recipient of hard words from both U.S. Securities and Exchange Commission (SEC) chairman Harvey Pitt and U.S. President George W. Bush.
At the time of the announcement, WorldCom's auditor for much of the period in question, Arthur Andersen LLP, issued a statement saying that "the WorldCom CFO (Sullivan) did not tell Andersen about the line cost transfers nor did he consult with Andersen about the accounting treatment."
On Tuesday, Sidgmore also addressed Sullivan's role in the scandal, saying that Sullivan had mentioned in meetings earlier in June that the company might have to take write-offs in its quarterly financial report.
Sullivan, who Sidgmore called "extremely talented", had a large amount of power consolidated in him at WorldCom, Sidgmore said.
"If you asked almost any analyst on Wall Street ... I think Scott Sullivan's name would come up in almost any case as one of the two or three best CFOs in America," Sidgmore said Tuesday.
Because of this "I think over time the board and Bernie (Ebbers, WorldCom's former CEO) got very comfortable with (him having a lot of power)," he said.
While spending a lot of time discussing Sullivan at the press conference, Sidgmore also addressed the roles, if any, played in the situation by Arthur Andersen and Ebbers.
"They swear up and down they didn't know anything about this," he said, referring to Andersen. "We, internally, are a little concerned they didn't know."
Sidgmore said that the company "(has) no idea" how much Ebbers knew about the accounting issues, though he did say that "the deeds we uncovered (last week) were part of the past administration."