MCI issued its long-delayed 2002 financial report last week, putting a final tally on the fallout from an accounting scandal that led to charges against its former chief executive officer.
Pretax income for 2000 and 2001 has been reduced by a total of US$74.4 billion, MCI said last week. The adjustments do not have any impact on the company's current financial position, it said.
Most of the $74.4 billion in restatements, or $59.8 billion, was tied to goodwill write-offs and write-downs in the value of intangible assets and property, plant and equipment in 2000 and 2001, MCI said.
A total of $5.8 billion in restatements was related to what MCI called "errors in the application of purchase accounting" for acquisitions dating back to 1993. Another $4.8 billion was taken as a charge to pretax income to reflect the correct value of certain assets that were improperly reduced by accounting irregularities, the company said. MCI did not specify in its press release what was responsible for the remaining $4 billion in restatements.
MCI's legal name is still WorldCom, the name under which company executives are alleged to have committed fraud designed to prop up WorldCom's stock price while concealing massive losses. Scott Sullivan, formerly chief financial officer at WorldCom, has pleaded guilty to fraud charges and will testify against former Chief Executive Officer (CEO) Bernard Ebbers at an upcoming trial. Ebbers has pleaded not guilty to charges of conspiracy and securities fraud.
WorldCom lost $48.9 billion in 2000, $15.6 billion in 2001, and $9.2 billion in 2002, according to its 10-K form for 2002 filed Friday with the U.S. Securities and Exchange Commission (SEC). MCI is still working on financial statement for 2003, and expects to emerge from the largest bankruptcy in U.S. history in April, it said.
MCI was not able to complete a restatement for 1999 and 1998 due to the decommissioning of financial reporting systems that were not Y2K compliant, and the turnover of personnel from that era, it said in its 10-K annual report. Therefore, financial data from those two years should not be relied on, it said.
In its SEC report, the company also revealed that Ebbers received just over $11 million in salary and bonuses in 2000 and was granted the right to purchase 1.24 million shares of Worldcom stock under a stock option plan.
Also, when Ebbers resigned from WorldCom in April 2002, he and the company agreed to consolidate a number of outstanding loans the company had made to him over his tenure into a single debt of $408.2 million payable over a number of years, according to the SEC filing. Ebbers was supposed to make a initial payment of $25 million in April of 2003 on that debt, but he defaulted and now owes MCI the full amount immediately, the company said.
To date, Ebbers has not paid back any of the loan, the company said.