WorldCom continues probe into accounting problems

But Justice Department reportedly trying to stop it


An internal investigation into accounting irregularities at WorldCom Inc. is continuing despite a report that indicated that the Justice Department is seeking to curtail it as it conducts its own inquiry, said the head of the company's internal inquiry.

William R. McLucas, former chief of the enforcement division at the Securities and Exchange Commission, who is conducting the internal investigation at WorldCom, said Friday that he was in steady communication with the Justice Department, in addition to the SEC, which is also investigating the company's accounting.

"We haven't been told to stop or limit our inquiry," McLucas said in a telephone interview Friday in response to a report published in The Wall Street Journal. "In any case, we wouldn't do anything in our inquiry that is inconsistent with the aims of the Justice Department."

Most internal investigations conducted at corporations that are facing a criminal inquiry usually result in a degree of coordination between the investigators. It is not unusual for the timing of witness interviews to be arranged by the two sides to ensure speedy progress for the criminal investigation. Such coordination is said to be taking place in the WorldCom case in a manner that will not impede the internal inquiry.

Separately, WorldCom filed a lawsuit in federal court in Jackson, Miss., Friday against Scott D. Sullivan, its former chief financial officer. WorldCom said in a statement filed with the SEC last week that the board had fired Sullivan after an internal auditor uncovered the accounting irregularities in May.

WorldCom is demanding that Sullivan pay back the $10 million bonus he received last year. Michael Wallace, a lawyer in Jackson for WorldCom, said he could not comment on the suit.

Last week, WorldCom's board hired McLucas, who is also a co-chairman of the securities practice at the Washington law firm of Wilmer, Cutler & Pickering, to conduct an investigation into accounting practices that resulted in the improper recording of more than $3.8 billion of expenses last year and this year.

A Justice Department spokesman could not be reached for comment Friday. Bradford Burns, a WorldCom spokesman, declined to comment.

In addition to the internal inquiry and the investigations at the Justice Department and the SEC, the House Financial Services Committee plans to hold a hearing on WorldCom's business practices tomorrow.

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