WorldCom finds $3.3 billion more in financial errors

NEW YORK -- Bankrupt telecommunications firm WorldCom Inc. said Thursday it has uncovered an additional $3.3 billion in bogus accounting, bringing the total to some $7.1 billion.

WorldCom also warned it may find more accounting problems as it continues an internal investigation.

The company previously reported finding $3.8 billion in accounting irregularities for 2001 and the first half of 2002. The latest discovery was made as the company reviewed its books for 1999 and 2000, with most of it tallied in 2000, the Clinton, Miss.-based company said.

As a result, WorldCom said it would restate its financial statements for all of 2000, 2001 and the first quarter of 2002 and likely write off $50.6 billion in goodwill and other intangible assets to reflect the reduced value of the acquisitions it has made.

WorldCom, the once high-flying long-distance and Internet services company, filed for Chapter 11 bankruptcy protection July 21 with the company listing $107 billion in total assets and $41 billion in debts. It was the biggest bankruptcy filing in U.S. history.

Thursday's additional restatement comes amid a string of accounting scandals that has tarnished some of the nation's largest firms, felling once mighty companies like Enron and Global Crossing. The fallout from the revelations of corporate malfeasance has severely shaken investor confidence, pummeling stocks and pension funds.

WorldCom spokesman Brad Burns said the figures announced Thursday have already been reported to the Securities and Exchange Commission and that the additional findings won't impact the company's ability to keep operating.

"The company identified the financial issues to the investigative authorities and we are working hard to get the company back on solid financial footing," Burns said.

Looking for more

Burns said investors and creditors should be aware that additional amounts of improperly reported pretax income and earnings before interest, taxes, depreciation and amortization "may be discovered and announced."

Arthur Andersen LLP had been WorldCom's auditor until May. KPMG LLP is now auditing WorldCom's financial statements for 2000-2002. Until that is finished, the total impact won't be known, the company said.

The accounting fraud that occurred in 2000 is said to differ from the techniques used in 2001 and 2002, according to a report Thursday by the financial news network CNBC.

In the latest case, the report said, Sullivan is believed to have used a variety of techniques to bolster operating income, including reversing reserves for bad debts into operating income.

Last week, two former executives -- chief financial officer Scott Sullivan and controller David Myers -- were charged with hiding the nearly $4 billion in expenses and lying to investors and regulators in a desperate bid to keep the company afloat.