Former WorldCom controller David Myers is looking to cut a deal with federal prosecutors in return for his cooperation against possible future indictments of other WorldCom executives, according to people close to the investigation. The sources saidthat Myers hasn’t yet formally offered up his assistance, but that talks are progressing toward an arrangement that would have him provide information that prosecutors could use against other WorldCom officials.
MYERS, WHO WAS arrested in August on charges of conspiracy and fraud, was further implicated this week in the WorldCom bookkeeping scandal that sought to hide billions of dollars in expenses as capital expenditures in an effort to make the company look more profitable than it really was. E-mails released by a congressional committee investigating the WorldCom scandal apparently show Myers ordering Steven Brabbs, a WorldCom employee in the U.K., to stop questioning a curious accounting entry that turned a $33 million charge into a profit.
“Do not have any more meetings with [employees from accounting firm Arthur Andersen] for any reason,” Myers wrote to Brabbs in January. “I spoke with AA this morning and hear that you are still talking… I do not want to hear an excuse, just stop,” Myers wrote. When Brabbs continued to press the issue, Myers again told him to stop asking questions and then ominously ended his message with: “Don’t make me ask you again.”
Myers resigned on June 25th, the same day that WorldCom publicly admitted that it had improperly booked $3.85 billion in expenses as long-term capital expenditures. WorldCom later admitted that an additional $3.3 billion in reserves had been improperly accounted for and other $500 million income was improperly booked. The company has subsequently filed the largest bankruptcy in U.S. history.
Federal prosecutors are now looking more closely at Myers involvement in the WorldCom scandal in light of the new e-mail evidence, sources said. Though prosecutors are still looking to make a deal with Myers in return for his cooperation, just how good a deal he gets could change as the case against grows stronger, said sources close to the investigation.
Myers’ attorney was traveling and not immediately available to return a call for comment.
If Myers cooperates he could further implicate his former boss, ex-Worldcom chief financial officer Scott Sullivan and others. Sullivan was arrested on the same day as Myers and on similar charges. Sullivan was indicted Wednesday after plea-bargain talks broke down, according to a report in The Wall Street Journal.
ROLLING OVER, ROLLING UP
The practice of turning one suspect against another is long time strategy in criminal cases. In white-collar crime cases, especially those with high visibility such as WorldCom or Enron, “You expect it, first off,” says Al Pennington, a Mobile-based criminal defense lawyer. “Snitching is a way of life in federal court,” he said. “These are the people that took names for the teachers and were the tattle-tails as they grew up.”
Federal prosecutors got just such a break in the Enron case when company insider Michael Kopper pled guilty to one count of conspiracy to commit wire fraud one money laundering charge. Kopper agreed to give up $12 million in illegal profits and pledged his cooperation with government’s continuing investigation into other Enron officials.
Having such an insider to testify against other company officials is often a key prosecutorial tool. Pennington said the defense will have to counter such testimony “as you would any snitch, on the basis of what they’re managing to walk away from and walk away with.”
The WorldCom case differs greatly from the Enron in that officials from Enron are alleged to have lined their pockets with millions in personal wealth. In the WorldCom story, officials simply drove the company into the ground through bookkeeping hi-jinks as they desperately sought to prop up the company’s share price.
Pennington suspects that any deal Myers will cut will be to reduce any possible jail time he might face. If Myers is faced with serving eight years “to pick a number,” Pennington said, “and he cuts a deal down to 21 or 22 months, then he’s looking at trading five years” off the original sentence “to give up old So-and-So that he didn’t really like anyway, well, you know, to me that’s an incentive to lie.”
In making the case to the jury, Pennington said he would attack the credibility of a witness that cut a deal, saying something like, “you’re telling us that you’re (giving this testimony) only because you’re a noble human being? Even though you’ve been ripping people off for the last four years? Your conscience finally got the best of you or your conscience about going to jail for eight years instead of two years got the best of you?”
BIGGER FISH
Prosecutors know that juries are inherently suspicious of any witness that gets a deal. That’s why most witnesses that testify against their associates in return for some kind of leniency are charged with some kind of crime and suffer some kind of penalty. Kopper, for instance, in addition to giving up $12 million also faces up to 15 years in federal prison.
And often in white-collar crime cases it’s the biggest fish in the corporate food chain that rolls over first, Pennington said. Prosecutors will “flip the big guys and roll them on the little guys if they get the chance,” he said.
But WorldCom and Enron aren’t exactly your normal white-collar criminal cases; these scandals have become the twin poster children for declining corporate morals and capitalistic malfeasance. Take tens of thousands of enraged shareholders that have seen their retirement accounts sunk into one of these two stocks evaporate and mix that with a healthy measure of political rhetoric and you have combustible cocktail.
In such a heated scandal climate it’s unlikely that allowing top corporate wrongdoers to evade harsh prosecution in return for ratting out their subordinates would have much political currency.
So it’s not surprising that attorneys for some of those involved in the WorldCom investigation are playing the political card.
“We deeply regret the rush to judgment here and political overtones and how this case is being handled,” said Sullivan’s attorney Irvin Nathan on the day he was arrested. “All of this suggests this is a lot of politics,” Nathan said. “Unfortunately, politics are intruding into the criminal justice system.”