WorldCom statement 'inadequate' - SEC chairman
The chairman of the US Securities and Exchange Commission condemned as ‘‘wholly inadequate and incomplete’’ a sworn statement by WorldCom explaining how the US telecoms giant came to inflate its earnings by $3.8bn (€3.87bn).
The disclosure was the latest in a string of high profile accounting scandals that have shaken public faith in corporate America.
The criticism from Harvey Pitt - unusually blunt for an SEC chairman - came as WorldCom, already facing civil fraud charges and believed to be on the brink of bankruptcy, told the agency it is studying possible new accounting problems with its reserve accounts.
The statement, which the SEC had demanded from the company, ‘‘demonstrates a lack of commitment to full disclosure to investors and less than full cooperation with the SEC,’’ Pitt said.
The Nasdaq stock market said it would remove shares of WorldCom from trading on Friday. Investors pummelled WorldCom stock, which plunged 90% to just under six cent a share in yesterday’s early trading after a three-day halt that followed its disclosure of accounting irregularities.
By noon yesterday, WorldCom - which once topped $62 (€63) a share - had become the most heavily traded stock in a single day in US history as the markets tumbled again.
The SEC is continuing its civil investigation of the company, and Pitt said, ‘‘criminal charges may be too good for the people who brought about this mess.’’
Referring to WorldCom’s sworn statement, Pitt said on Sunday: ‘‘If there is even an iota of false statement in there, people will pay heavily.’’
US President George Bush, who has denounced irresponsible corporate behaviour nearly every day since the WorldCom affair emerged, said: ‘‘By far the vast majority of corporate America are above-board and doing their jobs just the way you would expect them to do.
‘‘It is also important to know we’re going after those who aren’t and hold them accountable.’’
In its statement to the SEC, WorldCom said its audit committee was reviewing financial records for 1999 through 2001 because questions were raised about significant changes in reserves against potential financial losses.
