WorldCom Faces More Charges

The SEC expanded its fraud charges against WorldCom after the company admitted yesterday that its misstatements total more than $9 billion

November 6, 2002

2 Min Read

WASHINGTON, D.C. -- The Securities and Exchange Commission today filed an amended complaint against WorldCom, Inc. The amended complaint, filed in the Commission's pending civil action in federal district court in New York with WorldCom's consent, adds claims that WorldCom violated the antifraud provision of the Securities Act of 1933 (Section 17(a)), in connection with several securities offerings during the fraud, and also violated the internal controls and books and records provisions of the Securities Exchange Act of 1934 (Sections 13(b)(2)(A) and 13(b)(2)(B)). The amended complaint broadens the Commission's charges to allege that WorldCom misled investors from at least as early as 1999 through the first quarter of 2002, and further states that the company has acknowledged that during that period, as a result of undisclosed and improper accounting, WorldCom materially overstated the income it reported on its financial statements by approximately $9 billion.

The Commission filed its initial complaint against WorldCom on June 26, 2002, the day after WorldCom announced that it intended to restate its financial results for five quarters-all quarters in 2001 and the first quarter of 2002. (Litigation Release No. 17588.) The initial complaint charged WorldCom with violating various antifraud and reporting provisions of the federal securities laws, including Sections 10(b) and 13(a) of the Exchange Act and Exchange Act Rules 10b-5, 13a-1, 13a-13 and 12b-20, during those five quarters. The Commission also sought the appointment of a corporate monitor, and on July 3, U.S. District Court Judge Jed S. Rakoff appointed former Commission Chairman Richard Breeden to that position.

Since the Commission filed its action against WorldCom, the company has made a series of announcements expanding its anticipated restatement in amount and time. In addition, the Commission has brought civil actions against four former employees of WorldCom. The Commission filed civil actions against former WorldCom Controller David F. Myers on September 26 (Litigation Release No. 17753); former WorldCom Director of General Accounting Buford "Buddy" Yates, Jr., on October 7 (Litigation Release No. 17771); and Betty L. Vinson and Troy M. Normand, former accountants in the WorldCom's General Accounting Department, on October 10 (Litigation Release No. 17783). All of these actions are still pending.

The Commission acknowledges the assistance and cooperation of the U.S. Attorney's Office for the Southern District of New York, and the Federal Bureau of Investigation.

The Commission's investigation into matters related to WorldCom's financial fraud is continuing.

Securities and Exchange Commission (SEC)

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