The leader of the Andersen audit team at WorldCom Inc. testified Thursday that he told finance chief Scott Sullivan that he would continue to provide “good answers” after joining KPMG LLP, which WorldCom hired to replace Andersen.
Mark Schoppet was testifying at the federal trial of an investor fraud suit against the accounting firm. He said he told Sullivan in a May 2002 e-mail that he would try to continue to help the company after he began a new job at KPMG LLP.
A KPMG official retracted Schoppet’s pledge in another e-mail sent to Sullivan that month.
Two months later WorldCom filed the largest bankruptcy in U.S. history.
“Mark did not have the authority to speak for KPMG at that point,” wrote KPMG Vice Chairman Mary Pat McCarthy in an e-mail to Sullivan that was shown to jurors. “He wouldn’t be involved in the design, execution and conclusions of the audit.”
Investor lawyers are trying to show jurors that Schoppet and other former Andersen accountants had close ties to WorldCom management and an incentive to provide the long-distance company with clean audits while overlooking accounting manipulations.
Andersen is being sued for failing to discover an alleged $74 billion fraud at the company. The auditor was paid $47.1 million in auditing and consulting fees by WorldCom from 1999 to 2001.
McCarthy told Sullivan that WorldCom’s audit team would be led by a KPMG partner who had not worked at Andersen. Several Andersen auditors who handled the WorldCom account moved to KPMG with WorldCom in the spring of 2002. Schoppet left KPMG shortly after the WorldCom fraud was discovered in June 2002.
The investors contend that WorldCom’s investment banks, directors and Andersen should have discovered the fraud at WorldCom before signing off on a sale of more than $15 billion in company bonds.
Andersen is the only remaining defendant in the case. The other defendants have settled for more than $6 billion. Andersen is being sued under U.S. laws that require participants in the sales of securities to inspect the financial health of the issuing company closely if they wish to avoid liability.
