The Regents - University of California | Office of The President

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! There were no records to support decisions to capitalize the Line
Items. The amount which was capitalized was exactly the amount
needed by WorldCom to meet its profit margin goals.
! In testimony to The House Financial Services Committee on July 8,
2002, Melvin Dick, a former Andersen manager, admitted that
Andersen had not asked for documentation to backup WorldCom’s
financial statements.
! In March of 2002, Andersen knew that the SEC was investigating
WorldCom.
167. As the Chairman of the Board of WorldCom, Bert C. Roberts, told
the Committee on Financial Services of the U.S. House of Representatives on July
8, 2002:
The accounting irregularities that are the subject of
today’s hearings are an outrage to me. To my mind, the
failure of our outside auditors to uncover them is
inconceivable.
D. Andersen Allowed the Fraud to Continue and Made False
Representations About WorldCom’s Financial Statements
168. Andersen violated its professional responsibilities, and knowingly or
recklessly participated with WorldCom a scheme to defraud and in order to
artificially boost WorldCom’s reported revenue and profits.
169. Although Andersen was aware that practices of WorldCom artificially
inflated revenue were in violation of GAAP, Andersen provided a “clean” audit
opinion related to the company’s financial statements for year end 1994-2001 in
violation of GAAS (Generally Accepted Auditing Standards). For each of these
years, Andersen consented to its audit opinion to be filed with WorldCom’s 10-K,
Registration Statements and other public documents knowing that those
documents would be disseminated to the investing public. Plaintiff purchased
WorldCom stock in reliance on these representations.
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COMPLAINT