David F. Myers and Buford Yates, Jr.

Securities and Exchange Commission v. David F. Myers, Civil Action No. 02 CV 7749 (SDNY) (JSR)

Securities and Exchange Commission v. Buford Yates, Jr., Civil Action No. 02 CV 7958 (SDNY) (JSR)

The Securities and Exchange Commission announced today that judgments of permanent injunction were entered November 14 in two of its pending civil enforcement actions in the WorldCom matter -- those against David F. Myers, formerly WorldCom's Controller, and Buford Yates Jr., formerly WorldCom's Director of General Accounting. Both actions are pending in the U.S. District Court for the Southern District of New York before Judge Jed S. Rakoff. The judgments signed by Judge Rakoff impose the full injunctive relief sought by the Commission, prohibit each defendant from acting as an officer or director of any public company, and provide that monetary relief will be decided by the Court at a later date. The court retained jurisdiction for all purposes, including the imposition of further equitable relief and sanctions as may be determined following a hearing. Each defendant consented, without admitting or denying the allegations in the Commission's complaint, to the entry of the judgment against him.

The Commission also announced today that each defendant has agreed to be suspended from practicing before the Commission as an accountant.

The Commission's investigation into matters related to WorldCom's financial fraud is continuing.

In its complaints in the actions pending before Judge Rakoff, the Commission charged Myers and Yates with participating in a massive fraud that inflated WorldCom's earnings at the direction and with the knowledge of WorldCom's senior management. The Commission sought permanent injunctions, disgorgement of any ill-gotten gains, civil money penalties, and orders barring each defendant from serving as an officer or director of a public company. (Litigation Release Nos. 17753 and 17771)

The judgment entered against David F. Myers: (1) enjoins him from violating Section 17(a) of the Securities Act of 1933 ("Securities Act") and Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 13b2-1 and 13b2-2 thereunder, and from aiding and abetting WorldCom's violations of Section 13(a), 13(b)(2)(A) and 13(b)(2)(B) and Rules 12b-20, 13a-1 and 13a-13; (2) prohibits him from acting as an officer or director of any issuer that has a class of securities registered pursuant to Exchange Act Section 12 or that is required to file reports pursuant to Exchange Act Section 15(d); and (3) provides that any monetary relief will be decided by the Court at a later date.

The judgment entered against Buford Yates, Jr.: (1) enjoins him from future violations of Section 17(a) of the Securities Act and Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5 and 13b2-1 thereunder, and from aiding and abetting WorldCom's violations of Section 13(a), 13(b)(2)(A) and 13(b)(2)(B) and Rules 12b-20, 13a-1 and 13a-13; (2) prohibits him from acting as an officer or director of any issuer that has a class of securities registered pursuant to Exchange Act Section 12 or that is required to file reports pursuant to Exchange Act Section 15(d); and (3) provides that any monetary relief will be decided by the Court at a later date.

In addition, each defendant has agreed to a Commission administrative order, based on the injunction, suspending him from appearing or practicing before the Commission as an accountant, under Rule 102(e) of the Commission's Rules of Practice. Myers was licensed as a Certified Public Accountant (CPA) from the time he joined WorldCom until December 31, 2001. Yates was licensed as a CPA from 1988 until January 1, 1999.

The judgments entered by the District Court relate to two of the four civil actions the Commission has filed thus far in connection with the financial fraud at WorldCom. The Commission filed its initial complaint against WorldCom, Inc. on June 26, 2002, the day after WorldCom announced that it intended to restate its financial results for five quarters-all quarters in 2001 and the first quarter of 2002. (Litigation Release No. 17588.) That complaint charged WorldCom with violating various antifraud and reporting provisions of the federal securities laws, including Sections 10(b) and 13(a) of the Exchange Act and Exchange Act Rules 10b-5, 13a-1, 13a-13 and 12b-20, during those five quarters. The Commission also sought the appointment of a corporate monitor, and on July 3, Judge Rakoff appointed former SEC Chairman Richard Breeden to that position.

The Commission filed an amended complaint against WorldCom on November 5, adding claims that WorldCom violated the antifraud provision of the Securities Act (Section 17(a)), in connection with several securities offerings during the fraud, and also violated the internal controls and books and records provisions of the Exchange Act (Sections 13(b)(2)(A) and 13(b)(2)(B)). The amended complaint broadened the Commission's charges to allege that WorldCom misled investors from at least as early as 1999 through the first quarter of 2002, and further stated that the company had acknowledged that during that period, as a result of undisclosed and improper accounting, WorldCom materially overstated the income it reported on its financial statements by approximately $9 billion.

The Commission has also brought a civil action against Betty L. Vinson and Troy M. Normand, former accountants in WorldCom's General Accounting Department (Litigation Release No. 17783).

The Commission acknowledges the assistance and cooperation of the U.S. Attorneys' Offices for the Southern District of New York and Southern District of Mississippi, and the Federal Bureau of Investigation. Both Myers and Yates have pled guilty to criminal charges prosecuted by the U.S. Attorney's Office for the Southern District of New York.