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WorldCom fraud rocks markets

  1. WorldCom fraud rocks markets
    Jun 26 10:32
    AFR wires

    News of one of the biggest frauds in US corporate history, rivalling the collapse of Enron, sent the US dollar and Nasdaq futures reeling on Wednesday. Telecommunications giant WorldCom announced it had fired its chief financial officer over allegations he inflated the company's cash flow by some $US3.8 billion.

    Scott Sullivan is alleged to have improperly treated as capital spending $US3.1 billion in expenses last year and $US800 million in expenses in the first quarter of 2002, in contravention of accounting standards.

    WorldCom said it would take swift measures in response to the fraud, exposed in the Wall Street Journal, by laying off 17,000 staff, slashing investment and restating its financial statements for the past five quarters from a profit to a loss.

    The company's senior vice president and controller David Myers had also resigned following the revelations, the company said.

    Analysts expect this latest scandal to deal a mortal blow to WorldCom, which has been in talks with its banks to secure $US5 billion in new funding to help restore investor confidence after its stock plunged 90 per cent this year.

    WorldCom already faced a regulatory inquiry into its accounting practices and personal loans it made to former chief executive Bernie Ebbers. WorldCom Group's stock was removed from the S&P-500 index, and credit ratings on its $US30 billion in debt were slashed to "junk" status.

    The fraud revelations come at the worst possible time for Wall Street, already reeling from a string of scandals which have undermined investor confidence and sent the equity market to its lowest levels since the aftermath of September 11.

    The shockwaves from WorldCom's announcement hit after-hours trade in US equity indices. Nasdaq futures plummeted 3 per cent, while S&P-500 futures were down 1.7 per cent. The $US fell to fresh two-year lows against the euro on the news.

    Around Asia, Tokyo's Nikkei average slumped 2 per cent at the open to its lowest levels since late February.



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    P.S. I commented on this dodgy CEO a few weeks ago and to think all these corporate regulators have a clue. Absolute joke imho.

    Go the banks.

    Hell

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