August 28, 2002, 4:18 PM — Scott Sullivan, former chief financial officer of WorldCom Inc., was indicted Wednesday by a federal grand jury on charges of securities fraud, conspiracy to commit securities fraud and making false filings with the U.S. Securities and Exchange Commission (SEC). Buford Yates Jr., WorldCom's former director of general accounting was indicted on the same charges.
The charges detailed in the indictment are essentially those laid out in a complaint filed at the end of July by the U.S. Department of Justice against Sullivan and former WorldCom controller David Myers. Sullivan and Myers, both fired by WorldCom in June, were arraigned on that complaint and released on bail. The case is being prosecuted by U.S. Attorney for the Southern District of New York's office.
Myers, named in Wednesday's indictment as a co-conspirator but not indicted, is negotiating with prosecutors, according to press reports, which also said that plea negotiations with Sullivan had broken down. Also named as co-conspirators but not indicted are Betty Vinson and Troy Normand, listed in the indictment as accounting employees under Yates' direct supervision.
The indictment alleges that Sullivan, Yates and their co-conspirators schemed to artificially inflate WorldCom's reported earnings and knowingly violated Generally Accepted Accounting Principles. Five counts of the indictment's seven counts concern WorldCom's quarterly SEC filings for all of 2001 and the first quarter of 2002.
Attorneys for Sullivan and Yates did not immediately return calls seeking comment. Sullivan's representatives have previously argued that WorldCom's "complex" accounting was not in clear violation of standard accounting principles, and said he will contest criminal charges.