A fourth former WorldCom Inc executive pleaded guilty to fraud and conspiracy charges stemming from a scheme to hide US$7 billion in expenses that drove the company into the biggest US bankruptcy in history.
Former accounting official Troy Normand, 35, admitted in Manhattan federal court Thursday that he helped inflate WorldCom's earnings by concealing expenses. Earlier in the day, a former colleague, Betty Vinson, pleaded guilty to similar charges. Vinson told a judge she and Normand are cooperating with federal prosecutors.
The admissions by Normand and Vinson follow by three days a guilty plea by WorldCom's former accounting director, Buford Yates Jr, who told a judge that he was obeying orders from supervisors including former Chief Financial Officer Scott Sullivan and ex-controller David Myers, to misrepresent expenses. Last month, Myers admitted he made false entries to reduce costs and increase earnings.
Lawyers say prosecutors are building a case that might target ex-chairman Bernard Ebbers, who has not been charged. "In general, when you have a big investigation like this, guilty pleas usually mean the lower level people are cooperating and will testify in the grand jury" against their superiors, said New York securities lawyer Mark Arisohn, who isn't involved in the case.
Ebbers did not return calls seeking comment. His lawyer, Reid Weingarten, did not respond to telephone calls to his office and an e-mail message.
The US Securities and Exchange Commission filed a complaint against Vinson and Normand Thursday, accusing them of violating antifraud reporting rules and of aiding and abetting the WorldCom fraud.
The SEC is seeking the return of "ill-gotten gains" and financial penalties.
As it did with Myers and Yates, the SEC announced the filing immediately after Normand completed his guilty plea in federal court in New York. Vinson pleaded guilty in a separate hearing this morning.
"For the last 10 years, what you see is the SEC and the Justice Department making joint announcements of fraud cases," said former SEC attorney Thomas V. Sjoblom.
"It was an agreement from the days of the insider trading scandals that neither agency would try to run out in front of the other."
Vinson, who's 47, reported to Yates, who reported to Myers, who reported to Sullivan.
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