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News > Technology
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MCI hit with criminal charges
Oklahoma AG charges Ebbers, Sullivan, others with 15 counts of violating state securities laws.
August 27, 2003: 4:53 PM EDT

NEW YORK (CNNfn) - Oklahoma Attorney General W. A. Drew Edmondson filed criminal securities charges in Oklahoma City on Wednesday against WorldCom, its former CEO Bernard Ebbers, and five other former WorldCom officials.

The defendants are charged with 15 counts of violating the Oklahoma Securities Act.

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Former WorldCom CFO Scott Sullivan after his arrest last year. He pleaded not guilty last September to federal securities law charges.

Also charged are former Chief Financial Officer Scott Sullivan, former Controller David Myers, former Director of Accounting Buford Yates, and accountants Troy Normand and Betty Vinson, all of whom also face federal criminal charges. (For more on the charges click here.)

"We don't think [WorldCom's] bankruptcy plan protects the interest of Oklahoma or its people," Edmondson said at a news conference Wednesday. "I'd be surprised if Oklahoma remains the only state to file charges against WorldCom or its officers."

Ebbers' attorneys, however, argued that no charges have been brought against the former CEO. "This is not because of any lack of prosecutorial zeal; rather, it is because of a total lack of any evidence that Mr. Ebbers committed crimes," Reid Weingarten, Ebbers' attorney, said in a statement.

"We expect that when this case goes to court, we will be able to demonstrate that Bernard Ebbers was, in fact, involved in no wrongdoing and will be fully exonerated," he added.

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Former CEO Bernard Ebbers was one of six charged Wednesday.

WorldCom, now doing business as MCI, currently is in Chapter 11 bankruptcy protection, after an $11 billion accounting scandal.

"We intend to fully cooperate with the Oklahoma state Attorney General, but we do not believe this action will impact the bankruptcy process," the company said in a written statement Wednesday. "MCI remains on track for its confirmation hearing before the federal Bankruptcy Court, which is scheduled to begin on September 8, 2003."

U.S. Attorney General John Ashcroft had appealed to Oklahoma's governor to hold off on the charges because they could interfere with an ongoing federal investigation, according to a well-placed source.

The SEC said in a statement that it was "disappointed" it was not contacted by the Oklahoma Attorney General about the criminal charges filed Wednesday. "We hope that the Oklahoma Attorney General's actions will not jeopardize the criminal cases being prosecuted by the U.S. Attorney's Office or the ongoing investigations."

The Justice Department has yet to file charges against Ebbers or the company.

Accounting scandals at WorldCom, Enron, Tyco, Global Crossing, and other companies sent shock waves across corporate America and spurred Congress to pass the Sarbanes-Oxley Act of 2002 mandating improved corporate governance.

WorldCom did reach a civil settlement with the Securities and Exchange Commission that requires it to pay $500 million cash plus new stock valued at $250 million. The proceeds are to benefit victims of the WorldCom fraud.

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The company has been proceeding with plans to emerge from Chapter 11 protection. A confirmation hearing on the company's reorganization is scheduled to begin Sept. 8.

Competing telecom companies hope to block the reorganization. AT&T (T: Research, Estimates), SBC Communications (SBC: Research, Estimates) and Verizon (VZ: Research, Estimates) charge MCI rerouted calls to avoid paying access fees to other telecom companies.

As a result of the charges, MCI has been barred from receiving new federal contracts.

MCI spokesman Brad Burns said, "While we haven't received details from the state AG, the notion that former WorldCom executives committed fraud is not new news."

"We look forward to working with the state AG to help us put our past behind us. We knew it was going to be noisy leading in to our confirmation hearing," Burns added.

In an effort to reform WorldCom's corporate practices, a court-appointed monitor who spent a year sifting through MCI's problems outlined 78 directives in a report Tuesday aimed at preventing the abuses that were instrumental in the company's $11 billion accounting scandal.  Top of page


-- CNNfn's Allan Chernoff contributed to this report.




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