Clients claim WorldCom overbilled
By John Porretto
Associated Press
JACKSON, Miss. — If overbilling of customers becomes the next focus of WorldCom Inc.'s massive accounting scandal, Prieur Leary won't be surprised.
A former WorldCom client who runs a Miami-based communications services firm, Leary has fought a long-running battle with WorldCom over bills he says were chronically inflated.
"Basically we got the stone wall," he said.
The Securities and Exchange Commission filed civil fraud charges against WorldCom last week after the company disclosed it had hidden nearly $4 billion in expenses, inflating its earnings. And the Justice Department has begun a preliminary investigation of WorldCom, according to a department official who spoke on condition of anonymity.
Leary, other customers and some industry analysts suspect overbilling and its effect on revenue will emerge as another major issue as WorldCom's finances are scrutinized.
Once a company issues a bill, it can count the amount as revenue and is not required to wait until the money is received.
Drake Johnstone, an analyst with Davenport & Co. in Richmond, Va., began to question WorldCom's finances this spring after hearing claims from some clients that they had routinely been overbilled.
He said he also learned from San Diego-based ProfitLine Inc., a firm that audits telecom service bills for clients, that telecommunications companies on average overbill 10 percent annually, boosting revenue.
"If you took $20 billion in business revenue at WorldCom and applied the 10 percent, you'd get $2 billion," Johnstone said. "That's a pretty sizable number."
"This overbilling is another huge issue. It's really the next shoe to drop," he said.
Discount not on bill
Leary, chief executive of Infolink, said at one point last year he owed WorldCom some $300,000 because of billing errors he claims were the telecom giant's fault.
Infolink, founded in 1999, contracted with WorldCom to buy Internet access and other services. When his first bill arrived in June 2000, Leary said it was supposed to be for the agreed-upon amount of $6,000.
Instead, he said he was charged $12,000 for installation — which was supposed to be free — and for taxes that weren't applicable.
"We called our sales rep, and she's like, 'Oh, don't worry, this happens all the time,' " Leary said. " 'We'll get it taken care of.' "
But the overbilling continued, he said.
WorldCom eventually credited Infolink for some charges, but others remain disputed. Leary said he sent a letter last year to Arthur Andersen, WorldCom's outside auditor at the time, alerting it to the overbilling as well as to WorldCom executives and board members. He got no satisfactory response, he said.
Leary also complained to the SEC, which already was investigating certain accounting and lending practices at WorldCom when news of the latest corporate scandal broke last week.
Spokesman Brad Burns said at WorldCom, like others in the telecom business, "now and then we have billing issues," but the company would not comment on specific billing matters.
Burns also said the company didn't have "any conclusive evidence at this point" that overbilling would become an issue as it relates to revenue.
Common complaint
The question of overbilling is nothing new to WorldCom. The company agreed in March 2001 to pay as much as $90 million to settle claims that its MCI unit overbilled customers for long distance service. WorldCom bought MCI for $30 billion in 1998.
Jeffrey Vandeventer, a former WorldCom customer service representative in San Antonio, said he frequently encountered overbillings as he worked with WorldCom clients who had disputes.
Vandeventer said billing problems often arose when sales representatives would promise a new customer a discount on a service which would not appear on the bill. In other cases, clients would receive invoices from two different billing systems for the same service.
Vandeventer said he believed the mishaps occurred usually because of the staff's lack of training, and were not intentional.
Still, he said, when he found an error in a client's favor and recommended a reimbursement or erasure of an incorrect billing, his superiors often failed to respond. He said no one apparently wanted to take responsibility for an error.
He worked for WorldCom from November 1998 until March, when he resigned. "I just got so frustrated," he said.
