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Former WorldCom finance executive Sullivan indicted

Gail Appleson in New York

WorldCom Inc's former top finance executive was indicted on fraud charges on Wednesday in connection with the $7.68 billion accounting scandal that forced the telecommunications giant into the world's largest bankruptcy.

The grand jury indictment of former WorldCom chief financial officer Scott Sullivan replaced a criminal complaint filed against him by federal prosecutors on August 1 and paves the way for a trial in Manhattan federal court.

The grand jury also indicted WorldCom's former director of general accounting, Buford Yates, for his role in the alleged scheme aimed at artificially inflating WorldCom's earnings by hiding expenses.

WorldCom, the nation's No 2 long-distance carrier, filed the world's largest bankruptcy in July as it buckled under $40 billion in debt and the huge accounting fraud. It has also been sued by the US Securities and Exchange Commission.

Simultaneously with the filing of the indictment, the prosecutors filed notices that they planned to file criminal informations against WorldCom's former controller, David Myers, its former director of management reporting, Betty Vinson, and its former director of legal entity accounting, Troy Norman.

The filing of an information, instead of an indictment, often indicates a defendant plans to plead guilty and is cooperating with the government. A spokesman for the US Attorney's Office would not comment on whether guilty pleas were expected.

The WorldCom scandal is part of a black cloud hanging over corporate America in which officials of other large companies also have been accused of financial wrongdoings.

Former Enron Corp executive Michael Kopper last week became the first insider to plead guilty and cooperate with a criminal probe into the energy giant's implosion.

Members of the Rigas family, which founded Adelphia Communications, and the former chief executive of ImClone Systems Inc have also been charged with financial crimes.

US Attorney General John Ashcroft said the Sullivan and Yates indictments were the result of law enforcement actions aimed at prosecuting "corporate law-breakers and protecting the savings and pensions of Americans."

"With each arrest, indictment and prosecution, we send this clear message: corrupt corporate executives will be punished," he said.

The seven-count indictment against Sullivan, 40, and Yates, 46, charges each with one count of securities fraud, conspiracy to commit securities fraud, and fraud in connection with the purchase or sale of securities. It also charges them with three counts of making false filings with the SEC.

Sullivan's lawyer could not immediately be reached for comment. Yates's attorney, David Scherlter, said he could not comment until he had reviewed the charges against his client.

Myers, 44, who was named in the earlier criminal complaint, is described in the indictment of Sullivan as an unindicted co-conspirator. The charges also describe Vinson and Normand as unindicted co-conspirators.

When Sullivan and Myers were arraigned on the earlier complaint they were freed on personal recognizance bonds -- set at $10 million for Sullivan and $2 million for Myers.

The indictment alleges that the defendants and their co-conspirators began an illegal scheme in October 2000 aimed at hiding expenses and thus inflating WorldCom earnings to meet Wall Street expectations. The court papers allege the scheme lasted through this June.

As part of the scheme, they allegedly hid information from the company's external auditor, Andersen, and from the SEC.

The indictment alleges that Sullivan instructed Myers, Yates, Vinson and Norman to make false entries into WorldCom's general ledger. These entries, the indictment alleged, were designed to reduce WorldCom's line costs and thus increase the company's publicly reported earnings.

The conspiracy count carries a possible maximum 5-year prison term and a $250,000 fine and the securities fraud and false filings charges each carry a possible maximum term of 10 years and $1 million fines.

The company fired Sullivan in July, alleging he orchestrated the accounting debacle. Chief Executive Bernie Ebbers resigned under pressure in April.

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