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CNN Live Today

Interview with Scott Woolley

Aired June 27, 2002 - 13:41   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
FREDRICKA WHITFIELD, CNN ANCHOR: The magnitude of WorldCom debacle didn't take everyone on Wall Street by surprise. The telecommunications giant this week admitted to wrongly claiming nearly $4 billion in expenses. But four months before the scandal broke, the SEC had already launched a probe into former WorldCom CEO Bernie Ebbers.

Reporter Scott Woolley, with "Forbes" magazine, wrote about that probe in a piece called "Bernie at Bay," and Scott joins us now from New York.

All right, Scott. Well, you first reported about this deceptive bookkeeping back in April, so what is it that you saw coming that an awful lot of WorldCom employees said they didn't?

SCOTT WOOLLEY, "FORBES" MAGAZINE: Well, if you talk to customers, if -- there had been a shareholder suit, there had been an employee lawsuit -- some of the employees were up in arms about the various accounting practices.

You know, WorldCom was doing things like sending out two bills for the same account, which led me to believe that they are trying to boost revenue and trying to report they are collecting all this revenue that they actually weren't due.

WHITFIELD: But a lot of customers even noticed that, too, and even challenged WorldCom and MCI, more specifically, about that double billing.

WOOLLEY: Yes, after I wrote the story people would come up to me in the office and say, "I've been having trouble with my MCI WorldCom bill. They keep saying I owe them more than I really do."

So it was widespread on a consumer basis, and I would talk to CEOs of major corporate customers of WorldCom, and they would say WorldCom can't even tell us for sure what we owe them. So they've had long-standing accounting practices that really seemed to hide serious problems in the quality of their revenues and profits.

WHITFIELD: Was the difference here, in, say, compared to Enron, that the auditing was taking place internally, as opposed to getting an outside firm solely to keep an eye on their bookkeeping?

WOOLLEY: WorldCom had outside auditors as well, coincidentally, perhaps, Arthur Andersen, but Arthur Andersen had refused to certify some of these numbers that are now in dispute. But this really goes back four or five years, these problems that are bubbling to the surface, and so there's a real questions as to why the auditors had missed it for that amount of time.

Pretty similar to what happened in the Enron case.

WHITFIELD: OK, well we apologize to our viewers that your audio is a little fuzzy there, and it's not their television sets.

At first you had reported that at first the practice seemed to be intentional about the bookkeeping measures, or these rather backward bookkeeping measures, but then it was inadvertent later.

What do you mean? And how was it that there were these two different approaches?

WOOLLEY: (AUDIO GAP)

WHITFIELD: OK, well we'll have to apologize there. Our audio problems got even worse there for Scott Woolley, so if we are able to straighten it out, we'll try to bring him back to finish off this conversation. He's with "Forbes" magazine.

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