At the same time, WorldCom's stock has fallen from a high of $62 to a low of under $1. Trading of the stock on the Nasdaq exchange was halted this morning, after the company's shares closed at 83 cents on Tuesday. "This has been a very tough week for WorldCom, there's no doubtabout it," said WorldCom chief executive JohnSidgmore in a taped Webcast.
The company's value has gone from more than $115 billion to less than $1 billion. At the same time, WorldCom's stock has fallen from a high of $62 to a low of under $1. Trading of the stock on the Nasdaq exchange was halted this morning, after the company's shares closed at 83 cents on Tuesday.
WorldCom's stunning announcement raises even more questions about the accounting practices of major corporations, coming after months of revelations about dubious bookkeeping at the Enron Corp., Global Crossing, and other big firms.
By accounting for routine operating expenses as long-term capital expenses, the firm's quarter-to-quarter financial picture was made to seem much rosier than it actually was. This evening, Securities and Exchange Commission chairman Harvey Pitt announced the agency has filed a fraud charge against WorldCom in a federal court in New York.
WorldCom, which had a peak value of $115.3 billion in June 1999 when its shares reached a high of $62, is now worth less than $1 billion.
Until last month, WorldCom's auditor had been Arthur Andersen, the accounting firm that also audited the books of Enron and Global Crossing. Arthur Andersen issued a statement last night saying that WorldCom's chief financial officer had not told the firm about the accounting techniques now being called into question.
Instead of the profit of $1.4 billion the company reported in 2001 and $130 million in this year's first quarter, WorldCom now says it lost money during those periods, although it did not say how much. In disclosing the bookkeeping problem, WorldCom said it had fired its chief financial officer, Scott D.
WorldCom also said it was hiring William R. McLucas, the former chief of the enforcement division of the S.E.C., to conduct an independent investigation.
Particularly disturbing, Mr. Chanos said, is that WorldCom had manipulated its cash flow statements, not just its reported earnings. Investors used to believe that cash flow was a more reliable indicator of a company's financial health because the number could not be manipulated as easily as earnings, but that assumption now appears to be wrong.
– Markets worldwide reeled on Wednesday after U.S. long-distance carrier WorldCom Inc. ( WCOM) revealed Tuesday night it had disguised nearly $3.8 billion in expenses, in what appears to be one of the biggest accounting frauds in U.S. history.
WorldCom, with colorful, cowboy-boot wearing former chief executive and co-founder Bernie Ebbers at its helm, burst on to the world stage in 1997 when the upstart made a unsolicited offer to buy larger peer MCI and wrest it away from Britain's BT Group Plc.
Andersen audited WorldCom's financial statements for 2001. But in a statement, Andersen said that WorldCom had withheld key information and not consulted its auditors about the accounting treatment of the expenses.
June 26, 2002 -- In one of the largest corporate accounting scandals ever, long-distance phone company WorldCom has revealed it cooked its books by nearly $4 billion, prompting government fraud charges and a rebuke from the president.
In Canada today for the opening of the G8 summit, President Bush called WorldCom's announcement "outrageous," adding that the government "will fully investigate and hold people accountable.". An official at the Department of Justice indicated to ABCNEWS that the DOJ was looking into the matter as well. Company in Peril.