The Regents - University of California | Office of The President

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often obtained the loans first and only later would obtain Board of Directors’
approval. The loans were not properly disclosed in WorldCom’s financial
statements.
91. Also Scott D. Sullivan, the CFO, received lucrative compensation
packages. Sullivan, a C.P.A., joined WorldCom in late 1992 or early 1993 as a
result of WorldCom’s merger with Advanced Telecommunications Corporation
where he had been Vice President and Treasurer. His first title at WorldCom was
that of Assistant Treasurer. In 1994, he became Chief Financial Officer, Treasurer
and Secretary of WorldCom, and in 1996, he became a Director of the Company.
According to filings with the SEC, in 1998, he received a salary of $500,000 and a
bonus of $2,000,000; in 1999, in received a salary of $600,000 and a bonus of
$2,760,000. In 2000, he received a salary of $700,000 and a retention bonus of
$10,000,000. According to WorldCom’s proxy statements for its 2002
shareholder meeting, Sullivan beneficially owned 3,264,438 shares of stock.
92. Even as the Internet bubble burst in early 2000, WorldCom continued
to show profits although its stock value did decline. Until the third quarter of
2000, WorldCom’s reported earnings consistently met or nearly met analyst’s
predictions. In subsequent quarters, WorldCom claimed non-repeating charges
which stopped it from meeting targets. In the first six months of 2001,
WorldCom’s stock was generally trading in the $18-$21 range. After that, it
continued to decline, but its decline appeared to be consistent with other declines
in the industry which was suffering problems in the long-distance and Internet
business.
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VII.
THE FRAUDULENT SCHEME
93. While the Defendants were representing to the public that WorldCom
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was a profitable company, in fact, it was an illusion based on fraudulent
accounting practices accomplished with the assistance and knowledge of the
Defendants that allowed the fraud to flourish. WorldCom and the Defendants
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COMPLAINT