Fast-rising CFO at heart of WorldCom scandal
By John Porretto
AP Business Writer
JACKSON, Miss. — WorldCom Inc.'s Scott Sullivan was the kind of forthright chief financial officer that fostered respect among Wall Street analysts who rely on solid corporate information to guide clients.
"He was an analysts' CFO," said Patrick Comack, telecommunications industry analyst with Guzman & Co. in Miami.
So it was a shock to Comack and others when Sullivan was fired from his $700,000-a-year job and placed at the center of what could be America's largest corporate accounting scandal.
Sullivan, 40, WorldCom's CFO since 1994, lost his job Tuesday after the company disclosed it had hidden $3.8 billion in expenses from investors for five quarters, inflating earnings.
WorldCom shares fell to pennies and federal and state agencies immediately announced investigations.
The Securities and Exchange Commission filed a complaint, calling the accounting disclosure "a scheme directed and approved" by WorldCom senior management. It said WorldCom earnings reports were manipulated during 2001 and the first quarter of 2002 to show a profit when there was really a loss.
During that time, WorldCom's stock was already slumping in a telecommunications market and founder Bernie Ebbers was struggling with debt. Ebbers fortune was tied heavily to the share price of WorldCom, which had loaned him more than $400 million.
Ebbers and Sullivan worked closely together for years and Ebbers turned to Sullivan frequently for counsel. The two often had lunch at their Clinton headquarters.
Neither Ebbers nor Sullivan could be reached for comment Thursday. Sullivan lives in Boca Raton, Fla., and has an unpublished phone number. Ebbers did not return calls left at WorldCom's Jackson office.
Sullivan, who had joined WorldCom in 1992, became a director in 1996 and was considered an architect of WorldCom's rapid growth in the 1990s, including the acquisition of MCI Communications in 1998 for $30 billion. In addition to his salary, Sullivan was rewarded with millions of dollars in bonuses.
But in the spring, things turned sour. The SEC began investigating WorldCom's lending and accounting practices and some shareholders filed suit over loans to Ebbers, who was later ousted.
Sullivan survived and was promoted to executive vice president, but some have since questioned whether his loyalty to Ebbers led to the accounting scandal.
Mississippi Attorney General Mike Moore said Thursday he's determined to find out who "is responsible for cooking the books."
"It would surprise me if we didn't find there were a lot of people knowledgeable about the fraud here," said Moore.
