SEC says feds won't tolerate falsehoods in WorldCom report
WASHINGTON -- The top federal securities regulator put WorldCom Inc. executives on notice that "people will pay heavily" if there are any falsehoods in a report due Monday detailing the company's accounting scandal.
"We're demanding that they make a statement under oath, telling the American public exactly what went on there and what their true financial condition is," Securities and Exchange Commission Chairman Harvey Pitt said Sunday.
The telecommunications company disclosed last week that it disguised nearly $4 billion in expenses from the investing public.
The SEC filed civil fraud charges and gave WorldCom, based in Clinton, Miss., until Monday morning to file a detailed report on the "circumstances and specifics of these matters."
"If there's even an iota of false statement in there, people will pay heavily," Pitt said on ABC's "This Week."
"If the truth is in there and people get to know at least what the circumstances are, then we'll have an informed market, and there won't be insiders who can play games with the unsuspecting public," he said.
President Bush appears to have left open the possibility of a criminal investigation, pledging Friday that the Justice Department will "hold people accountable" for mismanaging their companies through deceit and corruption.
The president plans to address the issue more fully in a speech on July 9.
Bush's advisers are prepared to recommend that he propose new criminal penalties for corporate executives who certify misleading financial statements, a senior administration official reported.
A Democratic-written bill to tighten oversight of the accounting industry with a new private-sector body is expected to reach the Senate floor after Congress returns from its July 4 recess.
The White House has said the president might support the legislation if it is changed to give the SEC greater administrative authority.
"What we want is a much tougher set of rules that is subject to the SEC's oversight and jurisdiction and that's the way we hope ultimately the Senate bill will go," Pitt said. "I want the toughest, most pragmatic approach that we can take."
Xerox Corp. announced Friday that it improperly recorded billions of dollars more revenue in the past five years than the SEC had estimated when it took enforcement action against the company this spring.
"We're not finished with the Xerox case," Pitt said. "Everyone who may have been involved is still under investigation. And before much longer, we're going to make all of them responsible for what they've done."
The SEC is also investigating Halliburton Co. for its accounting practices in 1998, while Vice President Dick Cheney was its chief executive.
Asked if the administration's tough stand on chief executives acting responsibly would apply in that case, Pitt said: "We don't give anyone a pass. If anybody violates the law, we go after them."
Seeking to prevent future abuses, the SEC on Thursday ordered large companies to provide sworn statements from their chief executive officer and chief financial officer certifying the accuracy of financial reports.
The SEC has also sought to prevent the destruction of documents by WorldCom and payouts to company executives while the agency investigates.
WorldCom, second to only AT&T in the long-distance market, grew from a small telephone company into one of the telecom industry's biggest players through more than 60 acquisitions over the past 15 years.
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