Beaumont Role Under Worldcom Spotlight

Copyright Financial Times Information Limited Jul 9, 2002 Ron Beaumont, chief operating officer of WorldCom, is one of several senior executives who should have been aware of discrepancies in the telecommunications company's books before the near-$4bn fraud was revealed last month, according to people close to the company. The fraud that was allegedly engineered by Scott Sullivan, the chief financial officer who was fired the day the scandal was announced, led to a massive overstatement of WorldCom's capital spending - an area that came under Mr Beaumont's control. The company disclosed that some of the ordinary operating costs of renting access on other companies' telephone lines were transferred to its capital accounts, greatly overstating both its reported earnings and capital spending. Although he was not responsible for the company's accounting, Mr Beaumont oversaw the company's capital expenditures. These were reported at $7.89bn in 2001 - though $3.06bn of that has now been revealed to be linked to the disputed transfers. A further $797m of operating costs were disguised as capital spending in the first quarter of this year. "From an overall capital standpoint, probably 80-90 per cent of the capital budget was under Ron's control," said one former WorldCom executive. Defending Mr Beaumont, WorldCom said that only Mr Sullivan had a complete picture of all of the company's capital spending numbers. "No single operating unit knows what is going on in the rest of this operation and it all came together at Scott Sullivan's level," John Sidgmore, the chief executive officer who replaced Bernie Ebbers in April, said last week. "It was not clear, for example to Ron Beaumont, who spends most of the capital . . . that capital was being moved somewhere else," he added. "It is obvious now that maybe there should have been stronger reviews of some of that. But at the end of the day . . . our system really worked internally." The failure of other senior