WorldCom finds accounting errors, fires CFO

Telecommunications and Internet service provider WorldCom Inc. announced Tuesday it will restate its financial results for 2001 and the first quarter of 2002 as a result of accounting irregularities and has terminated its chief financial officer (CFO), Scott Sullivan. It will also reduce its workforce by 17,000, beginning Friday.

The announcements came on the heels of a series of setbacks for the Clinton, Mississippi, company, and helped send its stock down nearly 76 per cent Tuesday on The Island ECN Inc. after-hours market. On Tuesday evening, the stock was trading at US$0.20.

Certain transfers from line cost expenses to capital accounts during 2001 and the first quarter of 2002 were not made in accordance with U.S. Generally Accepted Accounting Principles (GAAP), according to WorldCom’s statement. The transfers totaled $3.05 billion in 2001 and $797 million in the first quarter of 2002.

Without the transfers, WorldCom’s earnings before interest, taxes, depreciation and amortization (EBITDA), would be reduced to $6.34 billion, and for the first quarter of 2002 would be cut to $1.37 billion. The company would have reported net losses for both periods, it said.

Also Tuesday, WorldCom said it had accepted the resignation of David Myers as senior vice president and controller.

The company has notified the Securities and Exchange Commission and asked its recently hired external auditor, KPMG LLC, to undertake a comprehensive audit of the financial statements from those periods, according to the statement. The company expects to provide a restatement of its results as soon as possible.

Previously, WorldCom used Andersen LLP as its external auditor.

WorldCom does not expect a restatement of those results to affect its cash position or its customers or services, the statement said.

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