Three former WorldCom executives may plead guilty and cooperate with prosecutors investigating America’s biggest accounting scandal.
Their anticipated help could increase the pressure on indicted former chief financial officer Scott Sullivan to strike a deal and tell what he knows about his boss, former chief executive Bernard Ebbers.
Sullivan is accused of overseeing a long running conspiracy to hide operating expenses in order to boost the telecom giant’s earnings.
The indictment also named a new defendant, Buford Yates Jr, WorldCom’s former director of general accounting.
Ebbers’ lawyers have said he had no knowledge of the allegedly fraudulent accounting decisions that allowed the company to falsely report billions of pounds in nonexistent earnings.
His name was not mentioned in the indictment.
The charges, filed after an apparent breakdown in plea negotiations between Sullivan’s lawyer and prosecutors, represent a major step forwards in the investigation of WorldCom.
As the indictment was unsealed, US Attorney James Comey filed papers indicating that three of Sullivan’s subordinates are prepared to plead guilty and provide information about their former bosses.
The documents show that former Controller David Myers and former accounting executives Betty Vinson and Troy Normand are preparing to waive their right to be indicted by a grand jury.
They could instead come to court to answer a criminal information, used by suspects who plead guilty under an agreement with authorities.
Myers was charged in an earlier criminal complaint and Vinson and Normand have been named unindicted co-conspirators.
Sullivan’s lawyer has said his client was a victim of “a rush to judgment.”
Sullivan allegedly instructed the executives to hide WorldCom’s increasing expenses, in part by illegally manipulating credits and debits entries in company ledgers.
The moves allowed WorldCom to claim to investors that their line costs were roughly 40% of their revenue between 1999 and 2000 - when the true figure was roughly 50%.
Sullivan, who is free on £6.5m (€10m) bail, faces up to 65 years in jail if convicted on charges of securities fraud, conspiracy and filing false statements with the SEC.
But federal guidelines call for a sentence of 10 years or less.