The Regents - University of California | Office of The President
The Regents - University of California | Office of The President
The Regents - University of California | Office of The President
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Scott [Sullivan] relayed a conversation you had with<br />
him at dinner when you volunteered to do whatever<br />
necessary to get Telco/Margins back in line. This was<br />
a dinner with Scott, Ron and Bernie prior to the<br />
announcement <strong>of</strong> last quarter.<br />
As you can see, margins have declined significantly and<br />
your immediate attention is appreciated. We need to<br />
address this during the quarter and not at the end <strong>of</strong> the<br />
quarter. Just so you know, I fully realize the impact that<br />
declining pricing to our customers has had on margins<br />
but I hope you feel like me that it is impossible to accept<br />
declining margins given the significant capex (over $16<br />
billion over the past 2 years), access reform and the<br />
fastest growing part <strong>of</strong> our business being Telecom<br />
(more capex with lower variable line cost). (Emphasis<br />
added).<br />
Bosley responded the next day in an e-mail:<br />
Actually I asked Scott what numbers he wanted and I<br />
would see what could be done to get them. But . . .<br />
obviously gross margins is very important and we will<br />
put several projects in place to get this moving back<br />
where it was. <strong>The</strong> first quarter is pretty well cast at this<br />
point but we will define what we can do to reverse the<br />
trend. (Emphasis added).<br />
130. During the internal investigation, the participants once again showed<br />
they had knowledge that there was no support for the entries (or unconvincingly<br />
pr<strong>of</strong>essed ignorance <strong>of</strong> the accounting methods). In internal audit correspondence<br />
dated June 17, 2002, accountant Betty Vinson, who posted the prepaid account<br />
entries, had no support for the entries and stated that she obtained the entry<br />
amounts from Buddy Yates and David Myers. Yates claimed to have no<br />
knowledge <strong>of</strong> the entries. Myers admitted that there was no support for the<br />
prepaid capacity and that they were “booked based upon what they thought the<br />
margins should be.”<br />
Next we went to David Myers’ <strong>of</strong>fice and requested<br />
support for the entries. David stated that he did not<br />
have support for the entries and the amounts were<br />
booked based upon what they thought the margins<br />
should be. David said that there were no accounting<br />
pronouncements to support these entries.<br />
47<br />
COMPLAINT
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