Reports: Ebbers knew of bookkeeping maneuvers

Former WorldCom CFO Scott Sullivan has told investigators that former CEO Bernie Ebbers knew of the plan to reclassify $3.9 billion in operating expenses as capital expenses over five quarters dating back to first quarter 2001, according to several published reports today.

Rep. Billy Tauzin, R-La., chairman of the House Energy and Commerce Committee, which is conducting the WorldCom Investigation, said in an interview with the Washington Post that committee investigators learned of Sullivan’s alleged statements during interviews with WorldCom attorneys and other company officials.

“This is the first evidence that he [Ebbers] was in fact aware of the cooking of the books,” Tauzin told the Post.

Ebbers’ attorney denied his client had prior knowledge of the scam, and said it was Sullivan’s decision to reclassify the expenses. “I have been led to believe by a variety of sources that Sullivan confirmed Ebbers’ lack of knowledge when he was interviewed by the company,” Reid Weingarten told the Post.

A spokesman for Rep. Tauzin did not return calls seeking comment.

Capitol Notes

Qwest Communications today filed an application with the FCC to provide in-region long-distance service in four states – Washington, Utah, Montana and Wyoming – under Section 271 of the Telecom Act. The company said it expects endorsements from all four state commissions in about 20 days. Previously, Qwest had filed 271 applications for Colorado, Idaho, Iowa, Nebraska and North Dakota. The company said it has spent more than $3 billion to date to open its local markets and comply with the competition provisions of the Telecom Act. The FCC has 90 days to approve or deny the applications.

BellSouth reported today the state commissions in each of five states – Alabama, Kentucky, Mississippi, North Carolina and South Carolina – where the carrier recently filed Section 271 applications with the FCC have filed “consultative opinions” that support the carrier’s applications. Each of the state commissions had previously endorsed the applications, according to BellSouth. The FCC has until September 18 to rule on the applications.

The Senate Commerce Committee will conduct a full hearing next Tuesday, July 16, to consider the nomination of Jonathan Adelstein to fill the FCC vacancy created when Commissioner Gloria Tristani stepped down last September. Sen. Thomas Daschle, D-S.C., had proposed his long-time aide as a candidate for the post last November.

-- Glenn Bischoff, senior writer