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The company fired its longtime chief financial officer, Scott Sullivan, 40, and is turning over its findings to the Securities and Exchange Commission. The SEC has filed fraud charges and is launching an investigation--as is the Justice Department, at least two congressional committees and the state of Mississippi, where WorldCom is based. All current and former employees, along with WorldCom's ex-accounting firm, Arthur Andersen, have been ordered to refrain from Enron-like paper shredding. Investigators are especially eager to hear from WorldCom founder Bernie Ebbers, who resigned as CEO in April, not long after it was revealed that he owed the company $366 million in low-interest loans. Ebbers had worked closely with Sullivan, whose office adjoined the CEO's. Ebbers could not be reached for comment.
In the same week that the veil was lifted from WorldCom's books:
--Xerox restated $6.4 billion in revenues dating to 1997. A restatement had been expected under an agreement Xerox reached with the SEC three months ago, over the company's practice of immediately booking revenue from long-term leases of copiers and other equipment. But the amount turned out to be more than triple what investors had expected and sparked a 13% sell-off of Xerox's stock.
--Tyco's former CEO, Dennis Kozlowski, already charged with evading $1 million of sales tax, was indicted anew, accused of tampering with evidence. He allegedly lifted a shipping document from a file before turning it over to prosecutors in New York City. He pleaded not guilty to the latest charges.
--Martha Stewart faced fresh doubts about her explanation of why, after buying stock in a drug company run by a close friend, she sold her shares just ahead of bad news about the company's cancer drug. Stewart, recently appointed a director of the New York Stock Exchange, denies wrongdoing, but shares in her Martha Stewart Omnimedia have declined 40% in the past month over fears of damage to her image.
--The Justice Department charged three former bankers in Britain with wire fraud in a $7.3 million scheme involving Enron-related partnerships.
--Minneapolis-based supermarket chain Supervalu revealed that, like WorldCom, it has been overstating profits--in its case, for four years.
--A federal grand jury in Harrisburg, Pa., indicted three former Rite Aid executives on fraud charges.
And then this: A survey by Starwood Hotels & Resorts showed that 82% of CEOS admit to cheating at golf. The same percentage hate others who do the same. "We're in a period of corporate Watergate, and Nixons are popping up all over," says John Challenger, CEO of outplacement firm Challenger Gray & Christmas. Qualified executives are turning down CEO offers out of fear they might be taking the helm of a firm about to crumble under some new accounting fraud, impeding the searches of even the cleanest firms. Among those looking for a new CEO are Gap and J. Crew.