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WorldCom Finds $3.8 Billion Error, Fires CFO
SAN FRANCISCO (Reuters) - WorldCom Inc., the No. 2 U.S. long-distance carrier, on Tuesday said it had fired its chief financial officer after uncovering improper accounting of almost $4 billion in expenses, in the latest financial scandal to rock Corporate America.
WorldCom also said it would cut 17,000 jobs, or more than 20 percent of its work force, starting on Friday, a cost-cutting move expected to save $900 million on an annual basis.
The Clinton, Mississippi-based company said that accounting irregularities involving expenses misrecorded as capital expenditures had inflated its cash flow and that otherwise it would have reported a net loss for 2001 and the first quarter of 2002.
The accounting irregularities, which did not conform to Generally Accepted Accounting Principles, included transfers between internal accounts of $3.06 billion in 2001 and $797 million in the first quarter of 2002.
Accounting firm Andersen, whose role as the auditor of Enron helped lead to the energy trader's collapse, had audited WorldCom's financial statements for 2001.
Shares of WorldCom had plunged in after hours trading on Tuesday following a report by CNBC that the company had uncovered accounting irregularities.
The stock fell to 20 cents a share on the Island system from a close of 83 cents on Nasdaq. The previous closing low was 87 cents, while the stock had traded as high as $16.06 in the past 52 weeks.
WorldCom also said it had fired Chief Financial Officer Scott Sullivan and accepted the resignation of David Myers as senior vice president and controller.
"Our senior management team is shocked by these discoveries," said John Sidgmore, WorldCom CEO for less than two months.
"I want to assure our customers and employees that the company remains viable and committed to a long-term future. Our services are in no way affected by this matter," he said in a statement.
WorldCom said it had notified the Securities and Exchange Commission ( news - web sites) and had asked auditor KPMG to undertake a comprehensive review of its financial statements for 2001
SAN FRANCISCO (Reuters) - WorldCom Inc., the No. 2 U.S. long-distance carrier, on Tuesday said it had fired its chief financial officer after uncovering improper accounting of almost $4 billion in expenses, in the latest financial scandal to rock Corporate America.
WorldCom also said it would cut 17,000 jobs, or more than 20 percent of its work force, starting on Friday, a cost-cutting move expected to save $900 million on an annual basis.
The Clinton, Mississippi-based company said that accounting irregularities involving expenses misrecorded as capital expenditures had inflated its cash flow and that otherwise it would have reported a net loss for 2001 and the first quarter of 2002.
The accounting irregularities, which did not conform to Generally Accepted Accounting Principles, included transfers between internal accounts of $3.06 billion in 2001 and $797 million in the first quarter of 2002.
Accounting firm Andersen, whose role as the auditor of Enron helped lead to the energy trader's collapse, had audited WorldCom's financial statements for 2001.
Shares of WorldCom had plunged in after hours trading on Tuesday following a report by CNBC that the company had uncovered accounting irregularities.
The stock fell to 20 cents a share on the Island system from a close of 83 cents on Nasdaq. The previous closing low was 87 cents, while the stock had traded as high as $16.06 in the past 52 weeks.
WorldCom also said it had fired Chief Financial Officer Scott Sullivan and accepted the resignation of David Myers as senior vice president and controller.
"Our senior management team is shocked by these discoveries," said John Sidgmore, WorldCom CEO for less than two months.
"I want to assure our customers and employees that the company remains viable and committed to a long-term future. Our services are in no way affected by this matter," he said in a statement.
WorldCom said it had notified the Securities and Exchange Commission ( news - web sites) and had asked auditor KPMG to undertake a comprehensive review of its financial statements for 2001
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