Ex-WorldCom Execs Busted on Fraud Charges

Aug. 1 -- Two former executives of bankrupt telecommunications giant WorldCom were arrested today for their alleged role in the accounting scandal that led to the company's downfall.

Former Chief Financial Officer Scott Sullivan and former Controller David Myers surrendered to federal authorities earlier today. Each now faces seven counts, including securities fraud, conspiracy and filing false statements with the Securities and Exchange Commission.

The government's complaint alleges that Myers, at Sullivan's behest, directed employees of WorldCom's accounting department to transfer hundreds of millions in dollars in line costs expenses as long-term capital expenses, a practice that made the company's financial picture look rosier than it really was.

The two were escorted, grim-faced and handcuffed, from a federal court building in Manhattan this morning. They were later released after a judge in the case set bail at $10 million for Sullivan and $2 million for Myers.

Sullivan's bail will be secured with a $5 million lien on his $15 million Boca Raton, Fla., home, while Myers' bail will be secured with two pieces of property he owns in Mississippi.

"We're preparing for trial, and expect that there will be an indictment," said Sullivan's attorney, Irv Nathan. A call to Myers' attorney was not immediately returned.

In Washington, U.S. Attorney General John Ashcroft said the arrests send a clear signal to executives who perpetrate corporate crime.

"Corrupt corporate executives are no better than common thieves when they betray their employees and steal from their investors," said Ashcroft.

Questions still remain over the fate of the firm's former chief executive, Bernie Ebbers, who has been under scrutiny after resigning in April amid questions about more than $400 million he received in loans from the company. Ebbers was not charged but is still said to be under investigation.

Cooking the Books

WorldCom disclosed at the end of June that it had inaccurately accounted for almost $4 billion in routine operating expenses, inflating its profits for five quarters. The company said it had terminated Sullivan and accepted Myers' resignation at the same time it revealed the accounting irregularities.