A staggering corporate scandal erupted late Tuesday when troubled telecommunications company WorldCom disclosed that its officials had misstated accounting figures in the amount of US$3.8 billion.
The affair could eclipse the scandal of US energy giant Enron, bringing another corporate disaster to the steps of the Arthur Andersen auditors -- a company already in the spotlight on charges of criminal wrongdoing.
According to a statement released by WorldCom, based in Clinton, Mississippi, monies that were actually expenses were booked as capital. This was accomplished outside of generally accepted accounting rules, the company said.
A proper accounting of those funds, the company said, would have resulted in a reduced cash flow of US$6.3 billion last year and US$1.4 billion for the first quarter of this year, meaning the company would have reported a net loss for these two periods.
WorldCom claimed a US$1.4 billion profit last year, and a US$130 million profit for the first quarter of this year. Final numbers for these five quarters won't be available until another audit is conducted, it said.
WorldCom's chief financial officer Scott Sullivan and controller David Myers have been sacked, the company said.
The company has notified US securities regulators of the impropriety, WorldCom said, and has retained an outside law firm to investigate the matter.
WorldCom CEO John Sidgmore said the company's management was "shocked by these discoveries."
"We are committed to operating WorldCom in accordance with the highest ethical standards."
As almost an afterthought, WorldCom also said in its release disclosing the massive scandal that it was laying off 17,000 in a cost-cutting move.
Sidgmore said the firm, despite the revelations, "remains viable and committed to a long-term future."
Andersen said in its own statement that it had acted in accordance to "professional standards at all times" and it had been kept in the dark about the Sullivan's actions.
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