CLINTON, Miss. - WorldCom Inc. officers and directors sold $31.6 million in shares during the 15 months the telecommunications company concealed losses, and the Securities and Exchange Commission said yesterday it will review the sales.
Chief Executive Officer John W. Sidgmore, who took over for ousted co-founder Bernard J. Ebbers in April, sold $441,054 in stock since January 2001.
Sidgmore said in an Internet broadcast yesterday that he was "shocked" to learn from an internal company audit that WorldCom created phony profits in the last five quarters by wrongly accounting for some expenses.
SEC Chairman Harvey L. Pitt said the agency filed civil fraud charges against WorldCom, and an SEC enforcement official, who requested anonymity, said it will investigate the stock sales.
WorldCom shares have dropped 94 percent since the end of 2000. The second-largest U.S. long-distance telephone company has piled up more than $30 billion in debt after years of acquisitions.
The stock sale "definitely raises some questions," said Carl Domino, president of Northern Trust Value Investors, which manages $1.8 billion and whose parent held 11 million WorldCom shares in March.
"If they sold and knew what was going on, it's particularly egregious."
Brad Burns, a spokesman for WorldCom, declined to comment on insider sales.
Ebbers hasn't reported stock sales since a 2000 sale intended to meet obligations under a margin lending arrangement, Burns said in October 2000. Ebbers could not be reached for comment.
The insider sales under scrutiny are part of the $1.48 billion made by officers and directors of WorldCom as the company's shares soared in the past decade.
Ebbers sold $59.2 million in shares, while former Chief Financial Officer Scott D. Sullivan, fired Tuesday, sold $45.4 million in stock between May 1995 and August 2000, according to the Washington Service, which tracks insider transactions. Sidgmore sold $91.6 million in all. Sullivan also could not be reached for comment.
The shares, which rose from 72 cents at end of 1989 to as high as $62 in June 1999, closed Tuesday at 83 cents. They were halted for trading on the Nasdaq stock market after the company said it would restate earnings for 2001 and the first quarter of 2002.
In addition to his reported sales, Ebbers sold 3 million shares for an estimated $78 million in September 2000.
The Washington Service didn't count that transaction because Ebbers reported the sale as a "forward sale agreement," rather than an open-market sale.
An SEC investigation of the company includes reviewing loans totaling about $408 million as of May to Ebbers, the company said in a filing.