WorldCom documents date bad bookkeeping to 2000 –

WorldCom Inc. documents show that the international division of the sinking telecommunications company found accounting irregularities more than two years ago and display a pattern of lies and financial wrongdoing by executives who wanted to reach profit forecasts, according to reports published Monday afternoon.

The documents were released by U.S. Representative Billy Tauzin, a Louisiana Republican and chairman of the House Energy and Commerce Committee, which is investigating WorldCom. The Clinton, Mississippi-based company on June 25 revealed financial irregularities in its books totaling nearly US$4 billion. WorldCom initially said that it hid expenses to make pretax profits look healthier for five quarters, starting last year and lasting through March of this year. However, the documents due for public release reportedly show the deception went on longer than that.

The documents were not yet available on the committee Web site, but were to be made public by Tauzin and Representative James Greenwood, a Pennsylvania Republican. Tauzin in particular has hit the interview circuit in recent weeks, appearing on news shows to discuss the growing scandal. Tauzin's committee is sifting through more than five boxes of WorldCom documents handed over after the company went public with the irregularities, and Tauzin has been revealing details.

CNN/Money, published online by CNN and Money magazine, had obtained the documents and quoted from them in a report Monday afternoon. The documents detail accounting changes made at the international division in 2000 and include a June 26 memo from Steven Brabbs, who was head of the international finance and control unit of the international division, according to CNN/Money. Brabbs outlined events that occurred at his division in the memo, which was sent to Cynthia Cooper, the company's internal auditor, who had uncovered the $3.8 billion in accounting irregularities at the heart of the scandal.

The international subsidiary closed its books for the first quarter of 2000, but employees at WorldCom in the United States changed how line costs were treated. The change was made in a journal entry and caused the international division's line costs to drop $33.6 million, Brabbs said in the memo, dated June 26, as quoted by CNN/Money.

"After phone calls and e-mails to the United States, we were told that the entry had been made on the basis of a directive from Scott Sullivan. Despite repeated requests, we were given no support or explanation for the entry," Brabbs is quoted as writing in the memo. Sullivan was fired as WorldCom chief financial officer on June 25 when the irregularities were revealed. He has been under particular fire as the scandal has unfolded.

Brabbs looked over the first quarter 2000 results with the company's U.K. audit partner and senior manager, after which Brabbs said that the auditors should make certain with WorldCom in the U.S. that appropriate accounting measures were going on, CNN/Money said. Details about the international accounting change were reported to Arthur Andersen LLP, the company's former outside accountant, and to senior WorldCom finance executives in the U.S., CNN/Money quotes the documents as saying.

The following quarter, WorldCom's senior executives wanted the international unit to make expense transfers at that level instead of at a higher level, but Brabbs refused. He was then ordered to make the changes and believed that order came from Sullivan, according to the memo, as quoted by CNN/Money.

ITWorld DealPost: The best in tech deals and discounts.
Shop Tech Products at Amazon