Bush says WorldCom probe coming

By Ron Fournier

Jun 26, 2002 |

President Bush on Wednesday called reports that WorldCom Inc. disguised $3.8 billion in expenses outrageous and said the government will fully investigate and hold people accountable."

On the opening day of a summit of wealthy nations, Bush said the U.S. markets are not as strong as they should be in part because of concerns about WorldCom and other cases of corporate malfeasance. He said weak corporate profits and fears about future terrorist strikes also trigger market jitters.

There is some concern about the validity of the balance sheet of corporate America and I can understand why," the president said at a photo opportunity with British Prime Minister Tony Blair.

We've had too many cases of people abusing their responsibilities and people just need to know that the SEC (Securities and Exchange Commission) is on it, our government is on it, and Arthur Andersen has been prosecuted. We will pursue, within our laws, those who are irresponsible."

Arthur Andersen was the accounting firm for Enron, the giant energy company that collapsed and took with it millions of dollars in stockholders' savings. Andersen was a WorldCom auditor.

In addition to the SEC investigation announced by Bush, a U.S. official said the Justice Department may get involved. Justice Department spokesman Bryan Sierra said, The matter is under review." He would not say whether an investigation had begun.

WorldCom, which owns the nation's No. 2 long-distance carrier MCI, said Tuesday that more than $3 billion of expenses in 2001 and $797 million in the first quarter of 2002 were wrongly listed on company books as capital expenses, thus not reflected in its earnings results.

News of the WorldCom accounting scandal sent stocks falling sharply Wednesday.

I am deeply concerned about some of the accounting practices that take place in America," Bush said. There are revelations that WorldCom has misaccounted $3.4 billion. It's outrageous," Bush said. We will fully investigate and hold people accountable for misleading not only shareholders but also employees as well."

The Dow Jones industrials dropped as much as 190 points, falling below 9,000 for the first time since Oct. 10. The Nasdaq composite index traded below its post-Sept. 11 closing low.

In addition to Enron's collapse, accounting problems have hit other big-name companies, including Tyco International Ltd., Global Crossing and Adelphia Communications, which filed for bankruptcy Tuesday.

Bush also has made critical comments about Enron and Andersen.

There is a need for renewed corporate responsibility in America," Bush said. When we find egregious practices such as the one revealed today, we'll go after them."

Andersen also was WorldCom's auditor for all of 2001 and the first quarter of 2002 -- the period for which WorldCom said it would restate earnings.

WorldCom, second to only AT&T in the long-distance market, grew from a small long-distance company into a telecommunications force through more than 60 acquisitions in the past 15 years. The growth was stopped in 2000 when federal and European regulators blocked WorldCom's proposed $129 billion merger with Sprint Corp., citing competition concerns.

Bush, in a private meeting at the White House last week with company executives, linked the stock market's recent weakness to mistrust among big and small investors.

Bush urged the business leaders to step up our focus on corporate governance," said one executive at the meeting, John Dillon of International Paper Co. He said Bush told the executives: I want you to get out in front of this and make any corrections that are required."

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