Byline: Patrice Hill, THE WASHINGTON TIMES
Federal agents arrested two former WorldCom Inc. executives yesterday on charges of securities fraud, purportedly for hiding the company's losses from investors through a $3.8 billion accounting scam.
The Justice Department's quickest and most high-profile move against corporate crime to date comes five weeks after the telecommunications giant revealed the massive accounting deception in an announcement that rocked the markets and prompted the rapid enactment of anti-fraud legislation in Congress.
"Corrupt corporate executives are no better than common thieves whenever they betray their employees and steal from investors," said Attorney General John Ashcroft in announcing the charges against former WorldCom Chief Financial Officer Scott D. Sullivan and former Controller David F. Myers.
Mr. Ashcroft said that although putting corporate lawbreakers in jail cannot restore the trillions of dollars investors already have lost to accounting fraud, it will restore the integrity of the financial markets and "protect the savings and pensions of Americans" from further erosion at the hands of self-interested executives.
The stock market last month sunk to its lowest levels in five years in the wake of WorldCom's announcement and other accounting-fraud revelations at Enron Corp., Global Crossing Inc. and other major companies.
Many on Wall Street have been calling for aggressive prosecution of the perpetrators as one of the best medicines for the battered stock market. Investors collectively applauded July 24 when three Adelphia Communications Corp. executives were arrested on fraud charges, helping to send the Dow Jones Industrial Average up nearly 500 points.
Yesterday's widely televised arrests in Manhattan of once highly respected officers of the owner of MCI, the nation's second-largest long-distance telephone company, failed to spark a stock rally, however. Investors focused instead on news of the flagging economic recovery and sent the Dow down 230 points.
U.S. Magistrate Judge James Francis freed Mr. Sullivan, 40, on a $10 million bond and Mr. Myers, 44, on a $2 million bond. The men, both of whom are millionaires, had their passports seized and are under travel restrictions.
If convicted, the two face up to 65 years in prison and more than $2 million in fines.
Their attorneys said they will plead not guilty. "We deeply regret the rush to judgment here and political overtones in how this case is being handled," Irvan Nathan, an attorney for Mr. Sullivan, told reporters in New York after the arraignment. …