For the second time in two weeks, Americans stung by layoffs and tumbling investments saw leaders of large corporations sporting handcuffs along with their tailored suits.
Two former WorldCom Inc executives who earned millions from the now-bankrupt telecommunications giant were arrested as part of the latest crackdown on shady accounting practices in the nation's boardrooms.
Sullivan, 40, of Boca Raton, Florida and Myers, 44, of Madison, Mississippi, were later released on personal recognizance bonds -- set at US$10 million for Sullivan and US$2 million for Myers. Both men had their passports seized and were given a series of travel restrictions.
PHOTO: REUTERS
If convicted, the men could face a prison term of up to five years and a US$250,000 fine on the one conspiracy count and 10 years and a US$1 million fine on each of the fraud and false filings counts.
Last week, federal authorities in New York arrested the founder of Adelphia Communications along with two of his sons and two other former executives on charges they looted the now-bankrupt cable giant and used it as their "personal piggy bank."
"With each arrest, indictment and prosecution, we send this clear, unmistakable message: Corrupt corporate executives are no better than common thieves," Attorney General John Ashcroft said.
PHOTO: REUTERS
Lawyers said the plunge in the stock market and the lengthening list of alleged corporate bandits has soured the public on corporate America since federal prosecutors went after accounting firm Arthur Andersen LLP this spring.
Andersen was accused of shredding documents and hiding evidence about Enron Corp, another company accused of fraud. Enron and Global Crossing, which also collapsed amid corporate accounting scandals, remain under investigation.
"You get a better headline by dragging somebody into custody in handcuffs than by indicting a faceless company," said Charles Rothfeld, a Washington corporate lawyer who helped defend Andersen against federal obstruction of justice charges.
Outside court, Sullivan's attorney, Irv Nathan, called him "an honest and honorable man" and accused the Justice Department of making him a scapegoat. "We deeply regret the rush to judgment and the political overtones involved," Nathan said.
Myers' lawyers said he would plead innocent if indicted.
WorldCom, which owns MCI, the nation's second-largest long-distance company, filed for bankruptcy protection July 21 after disclosing the accounting abuses. It was the biggest such filing in US history.
White House spokesman Ari Fleischer said President George W. Bush "is determined that people who break America's laws and engage in corporate practices that are corrupt will be investigated, and will be held liable, will be held accountable and will likely end up in the pokey, where they belong."
Bush's own transactions as a one-time director of Harken Energy Corp have drawn renewed scrutiny, and the Securities and Exchange Commission is investigating Vice President Dick Cheney's tenure as CEO of Halliburton.
Sullivan and Myers could get up to 65 years in prison if convicted on charges of securities fraud, conspiracy and filing false statements with the SEC. But federal guidelines call for a sentence of 10 years or less.
Sullivan is accused of directing Myers to falsify the company's balance sheet by about US$3.8 billion. That enabled WorldCom to continue reporting profits when it was actually losing money.
The charges against Sullivan and Myers could pressure them to tell investigators what they know about their one-time boss, former chief executive Bernard Ebbers, who also is under investigation.
Ebbers' lawyers said in a statement that he had no knowledge of the accounting decisions in question, and believed Sullivan and Myers to be "competent, ethical and loyal employees, devoted to the welfare of WorldCom."
The statement added, "Today's actions may be good theater for the media and useful to politicians, but they don't prove that Sullivan and Myers ever acted with criminal intent, an essential element we doubt the government will ever be able to prove in this case."
Justice Department officials declined to say Thursday whether they were still considering taking the more drastic step of charging WorldCom as a corporation. A conviction could drive the company out of business.
Executives who cheat investors "will meet the judgment they fear and the punishment they deserve," Ashcroft said. "When financial transactions are fraudulent and balance sheets are falsified, the invisible hand that guides our market is replaced by a greased palm."
As Sullivan and Myers, both dressed in dark suits, were led out of the FBI headquarters in New York en route to the courthouse, two passers-by clapped at the sight of the two men wearing handcuffs.
* Former chief financial officer Scott Sullivan and former controller David Myers were arrested Thursday on charges of concealing about US$3.8 billion in WorldCom expenses.
* They were later released on bail -- US$10 million and US$2 million, respectively.
* If convicted, the men could face prison terms of up to five years and a US$250,000 fine on the one conspiracy count and 10 years and a US$1 million fine on each of the fraud and false filings counts.
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