Two ex-WorldCom execs charged with fiddling the books to the tune of $3.8 billion to keep the telecom giant afloat were paraded around in handcuffs yesterday in the feds’ latest attempt to clean up corporate America.
The dark-suited former high fliers were led out of New York FBI headquarters and into federal court at about 10 a.m., three hours after they quietly surrendered to avoid the embarrassment of having agents descend on their homes.
Scott Sullivan, 40, of Boca Raton, Fla., and David Myers, 44, of Madison, Miss., could face a maximum of 65 years in prison each on seven counts of conspiracy, securities fraud and making false statements to the Securities and Exchange Commission.
Tears welled in the eyes of Myers’ wife, Lynn, as she sat in court clutching the hand of Mississippi priest Buddy Stallings while her husband, a former senior vice president of the company, put up the family’s two homes to secure a $2 million bond.
Sullivan, the former chief financial officer accused of ordering Myers to bury ballooning company expenses, sat motionless throughout the 10-minute hearing before being released on a $10 million bond.
As the men left court to fight their way through a thicket of TV cameras, Attorney General John Ashcroft took aim in Washington, saying corrupt corporate executives were no better than common thieves when they “betray their employees and steal from their investors.”
“When financial transactions are fraudulent and balance sheets are falsified, the invisible hand that guides our markets is replaced by a greased palm,” Ashcroft said.
The charges against Sullivan and Myers, who were both forced to resign from WorldCom in June, will allow investigators to squeeze them for information about former chief exec Bernard Ebbers.
The 17-page complaint unsealed yesterday charges the pair began cooking the books at America’s second biggest long-distance phone carrier in April 2001 after the company’s expenses began to increase faster than its revenues.
During the next year, until last April, staffers were instructed to secretly move $3.833 million in expenses off the books, enabling WorldCom to continue reporting higher earnings, the feds charge.
The expenses were allegedly shifted at the end of each financial quarter and ranged from $560 million a quarter to $941 million.
The company’s external auditors, including Arthur Andersen, were never told, the complaint says.
Myers admitted to the feds in June that WorldCom’s management had determined that had the company’s costs not been reduced, it “might as well shut the doors.”
He also said he felt “uncomfortable” shifting the expenses, but “once it was done the first time, it was difficult to stop,” the complaint said.
Sullivan told the feds the company had entered into a series of long-term lease agreements with other telephone companies to access additional telephone lines, but revenues had not grown to keep pace.
Sullivan’s lawyer, Irv Nathan, described his client as “an honest and honorable man” unfairly tripped up in the government’s rush to crack down on corporate crooks.
Name: Scott Sullivan
Age: 40
Title: Former chief financial officer
Salary: $700,000, but in 1998, the WorldCom board awarded Sullivan a $2 million bonus and backed it up with another $2.76 million “thank-you” the following year and a bullish $10 million reward in 2000.
Family: Wife Carla and infant daughter
Residences: Sullivan built a monolithic mansion on a $2.5 million block of land in the private Boca Raton community of Le Lac in Florida. He also has a home in Ridgeland, Miss.
Name: David Myers
Age: 44
Title: Former Senior Vice President
Salary: around $600,000
Family: Wife and son
Residences: Sprawling lakeside house a stone’s throw from WorldCom’s headquarters in Jackson, Miss.
Charges they face
Count 1: Conspiracy to commit securities fraud. Maximum penalty: 5 years prison and a $250,000 fine.
Count 2: Securities fraud.
Count 3: Filing false statement with the SEC for first quarter of 2001 on May 15, 2001.
Count 4: Filing false statement with the SEC for second quarter of 2001 on Aug. 14, 2001.
Count 5: Filing false statement with the SEC for third quarter of 2001 on Nov. 14, 2001.
Count 6: Filing false statement with the SEC for end of 2001 year on March 13, 2002.
Count 7: Filing false statement with the SEC for first quarter of 2002 on May 15, 2002.
Maximum penalty on counts 2-7 is 10 years in prison and a $1M fine.