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To: Augustus Gloop who wrote (5569)	6/25/2002 9:42:58 PM
From: Augustus Gloop	Respond to of 17639

WorldCom said it “promptly notified its recently engaged external auditors, KPMG LLP, and has asked KPMG to undertake a comprehensive audit of the company’s financial statements for 2001 and 2002.” WorldCom also notified Arthur Andersen LLP, which had audited the company’s financial statements for 2001 and reviewed such statements for first quarter 2002. This will have nothing to do with Andersen........Don't be fooled by an attempt to use them as the scapegoat ____________________________________________________________ “OUR SENIOR MANAGEMENT TEAM is shocked by these discoveries,” said recently-appointed WorldCom CEO John Sidgmore in a statement. “We are committed to operating WorldCom in accordance with the highest ethical standards.” WorldCom said its chief financial officer, Scott Sullivan, was dismissed by the board of directors. The company also accepted the resignation of David Myers as senior vice president and controller. As first reported by CNBC’s David Faber, the broad outline of the fraud, as described by people familiar with it, transpired like this: Each quarter in 2001 and during the first quarter of 2002, Sullivan would allegedly transfer a similar amount of WorldCom’s ordinary costs and treat them as capital expenditure. The costs are believed to have been related to WorldCom’s network, but should not have been treated as capital expenditure. Playing now: • CNBC: WorldCom engaged in “massive fraud” • Stocks go on late-day plunge • Amtrak to stay up and running through week In its statement, WorldCom said that “as a result of an internal audit of the company’s capital expenditure accounting, it was determined that certain transfers from line cost expenses to capital accounts during this period were not made in accordance with generally accepted accounting principles.” WorldCom said the “amount of these transfers was $3.055 billion for 2001 and $797 million for first quarter 2002. Without these transfers, the company’s reported EBITDA would be reduced to $6.339 billion for 2001 and $1.368 billion for first quarter 2002, and the company would have reported a net loss for 2001 and for the first quarter of 2002.” Because of its vast overstatement, WorldCom’s 43 percent profit margins were also allegedly a fiction, CNBC’s Faber reported. WorldCom said it “promptly notified its recently engaged external auditors, KPMG LLP, and has asked KPMG to undertake a comprehensive audit of the company’s financial statements for 2001 and 2002.” WorldCom also notified Arthur Andersen LLP, which had audited the company’s financial statements for 2001 and reviewed such statements for first quarter 2002. WorldCom said it will issue unaudited financial statements for 2001 and for the first quarter of 2002 as soon as practicable. It is unknown whether former CEO Bernie Ebbers, who resigned from the company at the end of April, was aware of the fraud, CNBC reported, quoting sources.