NEW YORK – WorldCom's former controller pleaded guilty to securities fraud Thursday, saying he was told by senior management to falsify records in what became the largest corporate accounting scandal in U.S. history.
David Myers, 44, entered the plea after telling U.S. District Court Judge Richard Casey he wanted to waive his right to be indicted on the charges. It was the first admission of guilt in the multibillion-dollar scandal.
Prosecutors say Myers and Scott Sullivan, the former chief financial officer at WorldCom, directed employees to falsify balance sheets to hide more than $3.8 billion in expenses. The deception enabled WorldCom to report a profit when it was actually losing money, according to regulators.
"I was instructed on a quarterly basis by senior management to ensure that entries were made to falsify WorldCom's books to reduce WorldCom's reported actual costs and therefore to increase WorldCom's reported earnings," Myers told the judge.
"I combined with others ... to assist in the commission of fraud," the former executive said.
Casey asked the defendant if he had committed the three crimes spelled out in court papers: conspiracy, securities fraud, and making false filings to the Securities and Exchange Commission.
"Yes, sir, I did," Myers answered.
Outside court, attorney Richard Janis said his client was a reluctant participant who had "expressed his discomfort and displeasure with the actions being undertaken by WorldCom."
WorldCom, which owns the nation's No. 2 long-distance telephone company MCI, became the biggest corporate bankruptcy in U.S. history in July. The company has since revised the amount of accounting improprieties up to $7.1 billion, and recent reports said the final total may reach $9 billion.
Myers faces up to 10 years on the most serious charge of filing false reports with the SEC. He is cooperating with the authorities against his former bosses, Janis said.
Myers is also negotiating with the SEC to resolve civil charges filed Thursday, his attorney said. The agency is seeking civil money penalties, repayment of allegedly ill-gotten gains and an order barring Myers from serving as an officer or director of a publicly traded company.
Prosecutors say the fraud began when Myers and Sullivan ordered WorldCom accounting executives Buford Yates, Betty Vinson and Troy Normand to record billions in operating expenses as capital expenses.
Sullivan and Yates were indicted a month after the bankruptcy filing on securities fraud charges.
The cooperation of Myers and others may increase the pressure on Sullivan to strike a deal with prosecutors and tell them what, if anything, former WorldCom CEO Bernard Ebbers knew about the alleged accounting crimes.
Sullivan's lawyer, Irv Nathan, has said his client is "an honorable and honest man" victimized by a rush to judgment. Ebbers' lawyer has said the former CEO knew nothing about any misreporting.
Vinson and Normand are also expected to plead guilty as part of cooperation agreements with prosecutors, according to court papers.