WCOM - Oopsie.
WorldCom Uncovers Massive Fraud
Involving $3 Billion Over 5 Quarters
By JARED SANDBERG
Staff Reporter of THE WALL STREET JOURNAL
NEW YORK -- WorldCom Inc. has uncovered what appears to be one of the largest corporate frauds in history with the discovery of more than $3 billion in expenses that were improperly booked as capital expenditures, a financial gimmick that boosted the firm's cash flow and profits over the past five quarters, according to people familiar with the situation.
The discovery was found during an internal investigation. WorldCom has fired its longtime chief financial officer, Scott Sullivan.
"The whole thing is just unbelievable," said one person familiar with the matter.
On Monday, WorldCom's shares slipped below $1 for the first time, a situation that could trigger a delisting by the Nasdaq Stock Market if it persists for 30 consecutive days. The decline was blamed on a negative report from Salomon Smith Barney analyst Jack Grubman, once the company's biggest supporter on Wall Street.
WorldCom's shares fell a further eight cents, or 8.8%, to 83 cents in 4 p.m. trading Tuesday on Nasdaq.
A delisting could force some of WorldCom's remaining institutional investors out of the stock and make it harder for the company to raise money through equity offerings in the future.
WorldCom, based in Clinton, Miss., has 20 million consumer customers and 80,000 employees. The core of its business is phone and data service to large corporate clients.
Updated June 25, 2002 6:42 p.m. EDT |
