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Monday, 8 July, 2002, 22:41 GMT 23:41 UK
WorldCom chiefs refuse to testify
Andersen's Melvin Dick, WorldCom's ex-CEO Bernie Ebbers and ex-CFO Scott Sullivan, and analyst Jack Grubman
Two out of four witnesses refused to testify
Bernie Ebbers, former chief executive of WorldCom, has refused to testify to a US Congressional committee on the basis that his testimony might incriminate himself.

Ex-chief financial officer Scott Sullivan followed suit, while other witnesses tried to shift the blame between one another for WorldCom's alleged misdeeds.

It looks like you were General Custer and WorldCom was the Indians, and you got slaughtered

Rep. Sue Kelly, New York Democrat, to Andersen's Mel Dick
The committee hopes to discover how a $3.8bn (2.5bn) accounting fraud could have gone unnoticed for more than a year.

Fresh from a scathing probe into collapsed energy firm Enron, the committee is striving to establish what, if any, laws were broken by WorldCom, and to what extent the current law needs tightening.

At the same time, efforts by Democrats to pass a tough bill regulating the accounting industry begin on the floor of the Senate, while Tuesday will see President George W Bush outline his own - slightly more lenient - vision of corporate regulation.

Taking the Fifth

But Mr Ebbers - who resigned in April, two months before WorldCom admitted its numbers for 2001 and 2002 were wrong - told the committee his counsel advised him to refuse to answer, as the Fifth Amendment to the Constitution allows.

He added: "When all of the activities at WorldCom are fully aired... I believe that no one will conclude that I engaged in any criminal or fraudulent conduct during my tenure."

Ex-WorldCom chief financial officer Scott Sullivan
Sullivan: said nothing except to take the Fifth
That, and other asides, brought condemnation from two Republican Congressmen, Max Sandlin from Texas and Richard Baker from Louisiana, who said that by making a statement after refusing to answer, he had waived his Fifth Amendment rights.

The chairman, Ohio Republican Michael Oxley, told Mr Ebbers that the committee reserved its right to recall him and ask him questions about matters covered in his initial statement, and perhaps to charge him with contempt of Congress.

"Make no mistake, the consequences to this sort of criminal activity... should be severe, and that may mean time in federal prison" if it was proved that he or others were responsible for hiding nearly $4bn in expenses, Mr Oxley added.

Ex-WorldCom chief financial officer Scott Sullivan also took the Fifth.

Taking the stand

Aside from Messrs Sidgmore, Ebbers and Sullivan, chairman Bert Roberts, Salomon Smith Barney telecoms analyst Jack Grubman and Melvin Dick, a former partner at WorldCom auditor Andersen, are taking the stand on Monday.

It's incomprehensible to me that a major accounting firm can have such a dismal record

Bernie Sanders
Vermont independent on Arthur Andersen
Their testimony is unlikely to be especially controversial, since the firm's current management have expressed their willingness to assist investigators in any way they can.

In prepared testimony released to reporters ahead of time, Mr Sidgmore implied the failure to spot the accounting irregularities was the fault of the auditors, Arthur Andersen.

"In effect, we audited our external auditors, we found what they missed, and promptly brought this matter to the attention of the Securities and Exchange Commission," he said.

Right back at you

WorldCom chairman Bert Roberts said in his prepared statement that the accounting problems were an "outrage".

"To my mind, the failure of our outside auditors to uncover them is inconceivable," he said.

Ex-Andersen man Mel Dick, though, sent the ball straight back.

"Neither I nor any of my team had any inkling that these transfers had been made," he told the committee.

"I would be very interested in how and when (WorldCom's internal auditors) found these entries."

Under fierce questioning, he told the committee that it was entirely reasonable for Andersen to miss the figures amid "thousands and thousands" of transactions", and for them to have matched generally accepted accounting practices (GAAP).

He was asked over and over again whether his company had any wider responsibility, but simply repeated that Andersen's job was to ensure the audit happened according to GAAP.

"We did our audit in accordance with all the things we were expected to do," he said.

That was not enough for New York Democrat Sue Kelly, who told Mr Dick: "It looks like you were General Custer and WorldCom was the Indians, and you got slaughtered."

Bernie Sanders, an independent from Vermont, was more outspoken.

"It appears very clearly that Arthur Andersen failed in their audit of WorldCom, you failed in the audit of Enron," he said. "It is incomprehensible to me that a major accounting firm can have such a dismal record."

Buy, buy, buy

As for Mr Grubman - WorldCom's biggest cheerleader on Wall Street - he told the hearing he had no idea that WorldCom had dug itself such a hole.

Speculation that inside knowledge had informed his decision to downgrade the company on 21 June - ahead of WorldCom's admission - from 'strong buy' to 'underperform' was "categorically false", he said.

Former Arthur Andersen auditor Mel Dick
Dick: "Never an inkling" there was anything wrong
His testimony was littered with admissions that he "could not recall" specifics - and when asked for them, typically tried to rely on commenting on his firm's "typical" behaviour.

He admitted that favourable reports on a company made it easier for his firm to sell it investment banking services.

And he acknowledged going to three board meetings - a "rare" occurrence for an analyst.

But he insisted: "I have always formed my own independent opinions. Right or wrong, I have always called them as I saw them."

WorldCom's mis-statements meant he was not responsible if his predictions turned out wrong.

"Our judgements are only as good as the public statements," he said.

Political pressure

In recent months, a number of congressional committees have held hearings into a number of corporate governance issues, particularly in relation to Enron.

Former WorldCom CEO Bernie Ebbers
Ebbers hoped to avoid "negative inferences"
But Congress has so far produced little in the way of tangible results, and the current investigation may be hobbled by the upcoming summer recess.

Mr Bush is also under pressure to produce results, since he is accused of having been too cosy with big business.

The Republican party is eager to show itself independent of commercial interests, after the embarrassment of the collapse of Enron, a major donor in the 2000 presidential campaign.

Mr Bush and his vice-president, Dick Cheney, have also had their own business dealings called into question by regulators.

The White House is tight-lipped over the exact contents of Tuesday's speech, but it is believed to contain a package of measures to make life tougher for delinquent executives, many of whom have avoided criminal charges in the past.

The BBC's Stephen Evans reports from Washington
"The hearings here are really about politics"

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