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Former WorldCom Inc. controller David F. Myers on Thursday became the first to fall in the largest accounting scandal in American history. Pleading guilty to a three-count information, Myers told Southern District of New York Judge Richard C. Casey that he falsified records to hide billions of dollars in costs at the direction of senior management at the now-bankrupt telecommunications company. Myers detailed how he was under pressure from a management team distressed over rising costs that would jeopardize the company’s standing and its stock price on Wall Street. “As a result, I was instructed on a quarterly basis by senior management to ensure that entries were made to falsify WorldCom’s books to reduce WorldCom’s reported actual costs and therefore increase WorldCom’s reported earnings,” he said. Myers said the “wrongful adjustments” were not disclosed to the “[Securities and Exchange Commission], analysts, auditors and the investing public.” The 44-year-old Myers has a cooperation agreement with federal prosecutors that could drastically reduce his punishment when he is sentenced for conspiracy, securities fraud and making false filings with the SEC. Following his guilty plea, Myers stood in the rain outside the federal courthouse at 500 Pearl St. on Thursday while defense lawyer N. Richard Janis described him as a “reluctant participant” in the accounting fraud that has driven the company into bankruptcy. Myers was arrested Aug. 1 along with former Chief Financial Officer Scott Sullivan. But when Sullivan and former WorldCom accounting executive Buford Yates were indicted one month ago, Myers’ name was not on the indictment, an indication he had agreed to waive indictment, plead guilty to an information, and cooperate with federal prosecutors. Janis, of Washington, D.C.’s Janis, Schuelke & Wechsler, said he is in talks with the SEC, which Thursday filed a complaint against Myers for violating securities laws. Janis also said Myers has agreed to plead guilty, probably next week, to one count of violating the law in Mississippi, WorldCom’s home state. A plea agreement has been reached with state prosecutors there, and Janis said he expects Myers would suffer “no additional sanctions” on the Mississippi charges, given his cooperation agreement in the Southern District. “Although he acted at the direction of others, and although he expressed his discomfort and displeasure with the actions being undertaken by WorldCom, he recognizes that as a corporate officer those facts do not relieve him of his own responsibility in this matter,” Janis said. “Mr. Myers has never sought to shirk that responsibility and has been forthright with the company’s internal auditors as well as the government’s investigators.” EXTENT OF PROBE Myers’ reference to “senior management” includes Sullivan, the former CFO, prosecutors allege, but there is no indication at this point how far the government’s probe of WorldCom has progressed regarding any role played by former CEO Bernie Ebbers. Myers also met repeatedly with Southern District prosecutors, FBI agents and the SEC even before he was charged on Aug. 1, the lawyer said. Assistant U.S. Attorney David Anders told the judge that Myers faces up to five years in prison on both the conspiracy and the securities fraud counts and as much as 10 years in prison on the false filings to the SEC. In addition, he faces more than $1 million in fines in connection with his crimes. WorldCom’s revenue shortfall was attributed to the increasing costs of acquiring communications lines to service what was expected to be an explosion in Internet-related business. The company, which found its own network of lines inadequate to meet a rapid expansion in demand for services, signed a number of lease agreements with third-party carriers to acquire new lines. But that demand never materialized, and prosecutors say senior executives at the company directed that false entries be made to hide the costs and the decline in the rate of growth of company earnings. Their method, it is alleged, was to bury the line expenses in capital accounts, enlisting several employees in a scheme that began in October 2000 and ran through June of this year, when the company announced a shortfall of $3.8 billion and fired Sullivan and Myers. That shortfall has more than doubled since then, the company has reveled. It declared bankruptcy in the Southern District on July 21.

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