The Regents - University of California | Office of The President

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shareholders. As a result of the scheme to defraud during the years from at least
1994 through 2002, WorldCom’s financial statements were false.
98. Additionally, WorldCom’s sales people engaged in unethical
practices from at least 1994 until 2002 that caused the financial statements to be
misstated. For example, WorldCom’s sales force routinely double-booked sales to
boost earnings. See Mississippi Business Journal. April 1, 2002. The SEC is
looking into all documentation regarding customer accounts, accounts receivables,
billing and contract disputes, employee commissions and, sales and marketing.
One customer, who claimed he was over-billed, complained to Andersen about his
over-billing problems. See Miami Herald, March 21, 2002.
99. WorldCom also engaged in improper barter transactions which
allowed it to improperly recognize revenue. For example, in February of 1999,
WorldCom and Electronic Data Systems entered into a transaction where each
company agreed to purchase goods or services from one another at inflated prices.
Electronic Data Service agreed to purchase $8.5 billion of communications
services from WorldCom over 10 years and to purchase a WorldCom unit for $1.6
billion. WorldCom agreed to hire Electronic Data Service to oversee its billing
and other services for about $7 billion over the same 10-year period. WorldCom
improperly recognized all the revenue from the transaction in one year in violation
of accounting standards thereby inflating its revenues on its financial statements.
WorldCom entered into other improper barter transactions from 1994 through
2002 which allowed it to show higher revenues on its financial statements.
100. In about 1999, WorldCom could not generate sufficient revenues to
meet analysts’ expectations from mergers. Defendants knew that if WorldCom did
not meet analysts’ expectations, WorldCom’s stock price and market value would
decline. The Defendants knew that if WorldCom’s value declined, they would
lose their lucrative fees and, Citigroup would not be repaid its loans.
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COMPLAINT