(Please Note: The Attorney General Often Deviates From Prepared Remarks)
This morning, the federal court here in the Southern District of New York unsealed a three count 30-page indictment of Bernard J. Ebbers and Scott D. Sullivan. The defendants are charged with:
The indictment alleges that beginning in or about September 2000 through June 2002, Bernard J. Ebbers, Scott D. Sullivan, and their co-conspirators engaged in an illegal scheme to deceive members of the investing public, WorldCom shareholders, professional securities analysts, the Securities and Exchange Commission, and others, concerning WorldCom's true operating performance and true financial results.
During the period covered by the indictment, Bernard J. Ebbers served as president, chief executive officer, and a director of WorldCom. Also during the period covered by the indictment, Scott D. Sullivan served in various capacities, including chief financial officer, treasurer, and secretary of WorldCom.
Today, in federal court here in Manhattan, Scott Sullivan pleaded guilty to participating from September 2000 through June 2002 in the illegal scheme with other former WorldCom, Incorporated officers and employees.
Mr. Sullivan pleaded guilty to Conspiracy to commit securities fraud;
Guilty to securities fraud; and guilty to false filing with the Securities & Exchange Commission.
Scott Sullivan faces a maximum sentence of 25 years in prison.
Scott Sullivan has agreed to cooperate.
As part of his duties as president, CEO, and a director, Ebbers signed the annual reports on Form 10-K, filed with the SEC. As part of his duties at WorldCom, Sullivan directed the preparation of and signed the annual reports on Form 10-K and the Quarterly Reports on Form 10-Q, filed with the SEC.
It is alleged that in or about September 2000, Ebbers, Sullivan, and their co-conspirators knew that WorldCom's true operating performance and financial results were in decline and had fallen materially below analysts' expectations.
It is alleged that Ebbers nevertheless insisted that WorldCom report financial results publicly that met analysts' expectations. As a result, it is alleged that rather than disclose WorldCom's true condition and suffer the ensuing decline in the price of WorldCom's common stock, Sullivan, with Ebber's approval, directed co-conspirators to make false and fraudulent adjustments to WorldCom's books and records.
From this point on, Ebbers, Sullivan, and their co-conspirators allegedly disguised true operating performance and financial results until some time in or about June 2002. As the truth about WorldCom's operative performance and financial results began to be revealed, the price of WorldCom's common stock plummeted, causing billions of dollars in shareholder value to decline.
It is alleged that Ebbers, Sullivan and their co-conspirators knew this scheme to defraud would present a materially false picture of WorldCom. Among the alleged adjustments to financial statements resulting in fraud were the following:
The results of these and other alleged efforts to defraud were:
America's economic strength depends on the integrity of the market place -- a belief in the free flow of reliable information, the transparency of financial dealings, and the accountability of corporate officers.
It is the honor, the duty, and responsibility of the United States Department of Justice to ensure that no one stands above the law-regardless of power, position, or privilege. The rule of law-and the people's trust-depend on swift, sure justice in the prosecution of crimes that manipulate competition or deceive the public.
Since it's creation in July, 2002, the President's Corporate Fraud Task Force has worked diligently to restore integrity to the marketplace. Today, we add to the Task Force's impressive accomplishments including:
Over 660 violators charged in the past two years;
Over 250 have already been convicted or have pleaded guilty.
I want to commend the Corporate Fraud Task Force, on which (Acting) U.S. Attorney for the Southern District of New York David Kelley serves. I thank David and the prosecutors and investigators in the Southern District of New York - especially Bonnie Jonas, David Anders, William Johnson, Steve Pekin, and Mei-Lin Kwan - for their dedication and hard work in bringing this matter to justice. I also thank the FBI, ably led by Special Agent in Charge of the New York office, Pat D'Amuro and our Task Force partners at the SEC, represented here today by Chief of Enforcement Steve Cutler.
This investigation remains active and ongoing.