WorldCom is subject of SEC inquiry

WorldCom has joined the growing ranks of telecommunications service providers whose corporate accounting has come under scrutiny by the U.S. Securities and Exchange Commission.

After the New York financial markets closed on Monday WorldCom announced that the SEC had confidentially requested 24 documents relating to its third quarter of 2000, its accounting policies for goodwill and implementation, and other matters.

WorldCom heard from the SEC late Friday afternoon, Bernard Ebbers, WorldCom CEO, said on CNBC Monday. The Clinton, Miss.-based company posted the letter from the SEC on its Web site earlier in the day.

The SEC request included documents relating to loans made by WorldCom to officers or directors, the integration of WorldCom's computer system with that of MCI, the company's long-distance arm, and WorldCom's tracking and review of analysts' earnings estimates, according to the letter.

Securities regulators also asked for material relating to federal or state agency investigations of WorldCom, for organizational charts and personnel records for former employees, and for disputed customer bills and sales commissions.

WorldCom suspended employees at three branch offices in February after discovering that some had allegedly booked up to $4 million in phony commissions, the company said recently.

Documents requested by the SEC date back as far as January 1999. The SEC specifically inquired into the wholesale accounts associated with a $685 million write-off taken in the third quarter for accounts deemed not collectable from bankruptcies and litigation, according to the letter on WorldCom's Web site.

WorldCom came under fire in January when it lent Ebbers money to keep him from selling millions of dollars of WorldCom stock after the rapidly falling share prices forced a margin call.

Ebbers is the only WorldCom officer with an outstanding loan from the company, and it will not be necessary for him to sell his stock to cover his margins, he told CNBC Monday. "I bought my stock in the company, and I regret that any shareholder lost money," he said.

WorldCom lost about half its market value in the space of six weeks as accounting scandals surrounding the Global Crossing and Enron bankruptcies engulfed Wall Street. Several technology companies are caught in the web of inquisition surrounding corporate accounting.

The IDG News Service is a Network World affiliate.