It was show time in Manhattan again yesterday as two disgraced WorldCom executives were handcuffed and made do the "perp walk" before cameras as they were led off to a federal courthouse and charged with corporate fraud.
Last week Mr John Rigas, former head of Adelphia, became the first executive to be treated as a criminal "perpetrator" in the anti-fraud campaign when he was arrested at dawn and paraded in handcuffs before being charged in an operation hailed by President George W Bush.
Yesterday passers-by watched as Mr Scott Sullivan and Mr David Myers, former chief financial officer and controller of WorldCom respectively, were propelled from FBI headquarters, with hands cuffed behind their backs, to black sedans for the short drive to the Manhattan courthouse. Trial was set for September 3rd and they were released on bail.
The humiliating treatment of alleged corporate wrongdoers, to show the Administration is serious about cracking down on corporate crime and to restore confidence in the markets, is proving popular.
"The upper echelons get away with it all the time and we little peons have to suffer," said a woman watching the arrests. "If it was you or me, we would be in handcuffs for sure," said a shop-owner approvingly.
At a press conference in Washington, Attorney General Mr John Ashcroft praised the arrests. He said the men could get 65 years in jail, and warned that "corrupt corporate executives are no better than common thieves when they betray their employees and cheat investors". He said the US Justice Department had moved on WorldCom, Adelphia, ImClone, Public Securities Corporation, Brite Aid, Allfirst Bank (where trader John Rusnak has been charged with fraud over losses of $691.2 million) and Enron.
"When financial transactions are fraudulent, the invisible hand that guides our market is replaced by a greased palm," said Mr Ashcroft. Most "corporate executives are hard-working honest people of integrity" but they would "root out the few" who were corrupt.
Mr Sullivan and Mr Myers, who surrendered to authorities about 7 a.m., were charged with two counts relating to securities fraud, and five counts of making false filings with the Securities and Exchange Commission, to convince analysts that WorldCom was meeting Wall Street expectations.
The charge sheet alleged that Mr Myers, instructed by Mr Sullivan, told employees of WorldCom to transfer $3.8 billion in debits on expenses sheet to credits as capital expenditure during the four quarters of 2001 and the first quarter of 2002.
Mr Sullivan's lawyer, Mr Irvin Nathan, said the "rush to judgment had political overtones", and the fact that Mr Ashcroft gave a press conference "suggests this is a lot of politics and it is unfortunate that politics is introducing itself into our justice system".
Mr Ashcroft refused to comment on the Enron case, where no arrests have yet been made, saying he had to recuse himself. Mr Ashcroft received campaign contributions from Enron. He aso received contributions from WorldCom. He did not explain why he distinguished between the two.
WorldCom, the second-biggest US long-distance carrier, was not charged in the criminal complaint, which stated that as part of their scheme, the two executives concealed information from the company's external auditor, Andersen, and from the SEC.
