Former WorldCom Inc. President and Chief Executive Officer Bernie Ebbers knew that the company was engaged in the deceptive accounting practices that have led the company into numerous investigations and to the verge of bankruptcy, according to U.S. Republican representative Billy Tauzin who revealed this finding Thursday night in an interview on the CNNfn program Moneyline.
WorldCom's former Chief Financial Officer Scott Sullivan told lawyers conducting the company's internal investigation into the WorldCom accounting scandal that Ebbers knew of the accounting irregularities, Tauzin said. Those lawyers then informed the House's Energy and Commerce committee, which Tauzin chairs, he said Thursday.
Tauzin's statement is the first time that Ebbers has been said to have direct knowledge of the accounting practices that led WorldCom, based in Clinton, Mississippi, to announce in late June that it would have to restate its financial results for 2001 and the first quarter of 2002 by nearly US$4 billion. [See "UPDATE2 - WorldCom finds accounting errors, fires CFO," June 26.] Sullivan was fired after that announcement, which has led to investigations into the company by the U.S. Securities and Exchange Commission (SEC), hearings in the U.S. House of Representatives and a handful of lawsuits.
Ebbers had stepped down as head of the company in late April amid the announcement of the laying off of 17,000 employees, a debt load of around $30 billion and a separate SEC investigation. [See "UPDATE2 - WorldCom President, CEO Ebbers resigns," April 30.]When asked if the revelation, as well as those about accounting scandals at Enron Corp. and other companies, meant that some corporate officers could face jail time, Tauzin responded, "Oh, absolutely. And, actually, I think the sooner some major corporate criminal goes to prison, I think the faster investor confidence is going to rebuild in this country."
"People have to believe that they're being watched and that, when they do something wrong, just like any common criminal who steals, that they go to a real jail," Tauzin said.