MCI puts WorldCom losses at $74 billion in 2000, 2001

Restatement is by far the biggest in history

March 13, 2004|By Andrew Countryman | Andrew Countryman,CHICAGO TRIBUNE

WorldCom Inc. took a major step yesterday toward emerging from bankruptcy, filing restated financial results in which it acknowledged overstating pretax profits by a remarkable $74.4 billion during two years.

Most of that comes from recognizing that various assets were worth nearly $60 billion less than previously calculated.

Although immense, those sorts of write-downs are legitimate accounting transactions that occur frequently across corporate America.

But WorldCom's restatement for 2000 and 2001 also includes at least $10.6 billion of wiped-out profits that the firm attributed to accounting "errors" as well as "improper" and "inappropriate" accounting.

"The numbers are stunning. It's amazing what those guys did way back when," Thomas Mullen, a WorldCom bondholder and general partner at hedge fund TWM Capital, told Bloomberg News.

Although Wall Street quickly dismissed the report as covering ancient history, it is historical nonetheless. The $74.4 billion is by far the largest restatement in U.S. history.

In fact, just under $5.5 billion in combined pretax profits was wiped out by three of the other largest restatements ever - at Rite Aid Corp., Waste Management Inc. and Xerox Corp.

In WorldCom court documents, the total amount of overstated profits as a result of the accounting scandal have been put at roughly $11 billion dating to 1999.

Without admitting or denying guilt, WorldCom agreed last year to pay $750 million in cash and stock to settle federal regulators' charges that it engaged in improper accounting to overstate profits.

For the long-distance giant, which is changing its name to MCI, the restatement is a step to putting its past behind it.

Company spokeswoman Brittany Hoff said the company's final major hurdle is filing its 10-K annual report for 2003, which is eagerly anticipated by Wall Street to shed light on current performance. Hoff said it likely would be filed close to the company's emergence from bankruptcy, anticipated next month.

The Chicago Tribune is a Tribune Publishing newspaper.

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