Oklahoma Attorney General, W.A., Drew Edmondson has filed criminal fraud charges against WorldCom and six of its former executives, including former CEO and founder, Bernard Ebbers.
Edmondson said it was rare for his office to name a company in a criminal complaint, but the move was justified. "The decision to commit this fraud was a company decision," he said. "This is not some rogue employee trying to line his own pockets. This is a conscious decision made for the benefit of the company."
Ebbers has been under investigation by federal officials for more than a year for WorldCom accounting fraud that allegedly totaled more than $US11 billion. But he hasn't been charged with any crimes.
Edmondson said that the US attorney's office in New York had asked Oklahoma officials to refrain from any action that would hinder their investigation into Ebbers or WorldCom, and Oklahoma offered to cooperate with that probe. But Edmondson said there had no been no further communication with those officials since May.
He said securities analysts and investors, including the state of Oklahoma, relied on false information from WorldCom between October 1, 2000, and March 31, 2002.
"By falsifying information, the company looked stronger on paper than it really was," Edmondson said. "Investors counted on this information when buying WorldCom securities. The company lied. These (six) employees lied. The law was broken. It's that simple."
The six former employees and WorldCom itself were charged with 15 counts of violating the Oklahoma Securities Act. All 15 counts are felonies, and each one is punishable by a maximum $10,000 fine and 10 years in state prison. WorldCom officials reacted to the charges by saying that they intended to fully cooperate and that they did not believe the charges would affect the company's bankruptcy process.
A hearing in the federal bankruptcy court on the company's plans to emerge from bankruptcy starts on September 8. "Today's action against the company would only punish our 20 million customers and 55,000 employees, 2000 of whom work in Oklahoma," said Stasia Kelly, general counsel of WorldCom, which now operates under the name MCI.
She quoted a finding by US District Court Judge Jed Rakoff, who ratified a $750 million settlement reached between WorldCom and the Securities and Exchange Commission.
"The court is aware of no large company accused of fraud that has so completely divorced itself from the misdeeds of the immediate past and undertaken such extraordinary steps to prevent such misdeeds in the future," Rakoff said.
Ebbers' Washington-based attorney, Reid Weingarten, couldn't be reached for comment.