NEW YORK (Dow Jones) - A lawyer for a group of WorldCom Inc. stockholders and bondholders said former auditor Arthur Andersen LLP was more concerned with "lining its own pockets" than catching a massive accounting fraud at the telecommunications company.
As opening statements began in a class-action lawsuit here on Tuesday, Sean Coffey, who is representing the case's lead plaintiff New York State Common Retirement Fund, said auditors at Arthur Andersen were the only people in a position to catch the fraud and put a stop to it early.
Instead of asking tough questions of WorldCom's top executives or continuing to demand access to company records, Andersen shrugged its shoulders and acquiesced to a client that paid the firm more than $40 million in auditing and consulting fees in a three-year span, Coffey said.
"It was (Andersen's) job to look under the hood, to check the tires and to tell investors this car was safe to drive," Coffey said.
Arthur Andersen is the lone defendant that has not settled claims arising from the sale of stock and bonds issued by WorldCom between 1999 and 2001. The case is expected to last about three weeks.
WorldCom's 12 outside directors have agreed to a $60.75 million settlement in the case, agreeing to pay $24.75 million out of their own pockets. Insurance will cover the rest. Bert C. Roberts Jr., WorldCom's one-time chairman and the lone director holdout, agreed to join the last week.
More than a dozen banks, including some of the biggest names on Wall Street, have agreed to pay about $6 billion to settle the case.
Elliott Lauer, a lawyer for Arthur Andersen, countered in his opening statement Tuesday that the accounting fraud was concealed from WorldCom's auditors by its top executives and the only question for jurors is whether the auditors did their professional best.
"You will see no evidence in this case that any of these accountants acted with anything other than good faith," Lauer said.
WorldCom emerged from Chapter 11 bankruptcy protection in April under the name MCI Inc. (MCIP).