X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
The parade of disgraced former executives through federal court in lower Manhattan continued Monday with the guilty plea of Buford Yates in the WorldCom Inc. case. Yates admitted his role in the multibillion-dollar accounting scandal, telling Southern District of New York Magistrate Judge Andrew J. Peck that he was part of a scheme to conceal spiraling costs on the company’s balance sheet in a failed effort to boost WorldCom’s stock price. “I came to believe that the adjustments I was being directed to make in WorldCom’s financial statements had no justification and contravened generally accepted accounting principles,” Yates told Peck. “I concluded that the purpose of these adjustments was to incorrectly inflate WorldCom’s reported earnings in order to meet the expectations of securities analysts and mislead the investing public.” The telecommunications giant declared bankruptcy on July 21, shortly after revelations that $3.8 billion in “line costs,” which should have been listed as operating expenses, were in fact hidden in capital accounts. Line costs are the fees that WorldCom paid to other companies for leasing telecommunications networks. Since the accounting irregularities were first announced, the company has said the amount of money misreported may have been more than $7 billion, if not higher. Yates, who is cooperating with the Southern District U.S. Attorney’s Office in the investigation, was careful Monday to state that he acted on the orders of higher authorities when he and other top employees worked to hide the line costs in capital accounts. Both Yates and his attorney, David Schertler of Washington, D.C., declined comment when asked after the guilty plea whether former WorldCom Chief Executive Bernie Ebbers personally ordered the adjustments to company statements. But Schertler did say his client “strenuously objected to making those adjustments,” but was told the adjustments “had been approved by the highest levels of WorldCom management.” Yates, 46, was WorldCom’s director of general accounting when he was ordered to make the changes that he admitted to Monday. He was charged with, but did not plead guilty to, five counts of submitting false filings to the Securities and Exchange Commission. But in pleading guilty to conspiracy and securities fraud, Yates became the second WorldCom executive in two weeks to admit involvement in the scandal and cooperate with the government. In September, company Controller David Myers pleaded guilty to an information in which he essentially admitted the same wrongdoing as did Yates. And court papers indicate that two more WorldCom executives, Betty Vinson and Troy Normand, are cooperating with the government and will soon plead guilty in the case. Yates was indicted along with former WorldCom Chief Financial Officer Scott Sullivan, who is still facing charges in the case. While Yates faces as much as 10 years in prison on the top count in the indictment, securities fraud, he is likely to receive a much lighter sentence, in part because of his agreement to cooperate. Assistant U.S. Attorney David Anders represented the government.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.