WorldCom executives arrested

Federal authorities today arrested former WorldCom chief financial officer Scott Sullivan and controller David Myers in New York, charging them with seven counts of fraud, conspiracy and making false statements to the SEC.

The two surrendered to the FBI this morning after a federal court unsealed an indictment charging Sullivan and Myers each with one count of fraud, one count of conspiracy to commit fraud and five separate counts of falsifying financial reports. The securities fraud and false statement charges carry a maximum prison sentence of 10 years, while the conspiracy charge carries a sentence of five years.

WorldCom fired Sullivan and Myers in June after revealing the company had reclassifed $3.8 billion worth of operating expenses in the last two years as capital expense, inflating the company’s earnings. Though former CEO Bernie Ebbers was not named among the indictments, the company recently has attempted to put distance between itself and the scandal by blaming Ebbers and his executive staff for the scandal.

The Justice Department reportedly is considering charges against WorldCom itself. If the corporation is indicted, it could effectively kill the number two long distance carrier and would make the carrier’s already grueling bankruptcy even more difficult. WorldCom officials were not immediately available for comment.

--Kevin Fitchard, Staff Writer