Investigators: Ex-CEO Was In The Know

Ex-CFO Sullivan Fingers Ebbers In WorldCom Accounting Fraud

(CBS)  WorldCom's former chief executive was aware that hundreds of millions of dollars were shifted as part of nearly $4 billion in accounting irregularities, company attorneys have told a House investigative panel.

The telecommunications giant's founder and former CEO, Bernard Ebbers, invoked his Fifth Amendment right against self-incrimination at a congressional hearing Monday and refused to answer questions, citing current investigations by the Justice Department and the Securities and Exchange Commission.

The SEC has filed civil fraud charges against WorldCom, one of the latest major corporations to face allegations of executive wrongdoing and accounting dodges — driving down public confidence in business and the stock market.

Attorneys for WorldCom recently told investigators with the House Energy and Commerce Committee that "Bernie (Ebbers) was aware that hundreds of millions of dollars had been moved," committee spokesman Ken Johnson said Thursday. The attorneys said that information came to them from Scott Sullivan, WorldCom's former chief financial officer, who also refused to testify on Monday.

"This is the first evidence that we've seen that the muddy little footprints may lead back to Bernie Ebbers' doorstep," Johnson said. "Clearly there's evidence that some people at WorldCom knew someone was cooking the books."

Appearing on CNN's "Moneyline," Thursday, Rep. Billy Tauzin, chairman Energy Committee, echoed Johnson's claims.

"The fired CFO of the company, the guy in charge of financial affairs of the company, admitted to those lawyers that the chairman of the company, Bernie Ebbers, did in fact know that millions of dollars, hundreds of millions of dollars had been moved into capital debt rather than expensing it as ordinary debt of the corporation," Tauzin said in the interview.

Ebbers, in an interview with attorneys conducting an internal investigation for WorldCom, denied Sullivan's assertion that he was aware of the transactions, Johnson noted.

His Washington attorney could not immediately be reached for comment Thursday evening.

When he invoked his constitutional privilege at the hearing by the House Financial Services Committee, Ebbers said, "I do not believe I have anything to hide."

When all the facts are out, he said, "I believe that no one will conclude that I engaged in any criminal or fraudulent conduct."

Led by Reps. Billy Tauzin, R-La., and Jim Greenwood, R-Pa., the Energy and Commerce Committee has been investigating WorldCom's massive misstatement since the company disclosed last month that it disguised $3.9 billion of expenses as capital expenditures to appear more profitable.

Johnson said the committee received five boxes of documents from WorldCom on Thursday, the deadline set by the panel in its request for records — including those related to a WorldCom internal audit and minutes of the company's board and audit committee.