WorldCom executives arrested

Scott Sullivan's arrest was paraded before cameras

Two former top executives at bankrupt telecommunications firm WorldCom have been arrested and charged with fraud.

Corporate executives who cheat investors, steal savings and squander pensions will meet the judgement they fear and the punishment they deserve

US Attorney General John Ashcroft

Federal prosecutors allege they colluded to hide billions in expenses, while lying to investors and regulators.

Former chief financial officer Scott Sullivan and ex-controller David Myers face seven counts of securities fraud and filing false statements with the Securities and Exchange Commission (SEC).

They surrendered and were taken into custody by Federal Bureau of Investigation (FBI) officials early on Thursday, New York time.

Later they were taken in handcuffs to a federal court in the Southern District of New York, where the two former executives posted bail - set at $10m for Mr Sullivan and $2m for Mr Myers - and were released.

Speaking to reporters later in the afternoon, US Attorney General John Ashcroft, who heads the agency in charge of the investigations, said both men face prison terms of up to 65 years if convicted.

"Today's charges are the latest in a sustained series of law-enforcement actions aimed at prosecuting corporate lawbreakers and protecting the savings and pensions of Americans," Mr Ashcroft said.

Ongoing investigations

Ashcroft: Arrests send an unmistakable message

Messrs Sullivan and Myers stand accused of colluding to hide company expenses as profits to the tune of $3.85bn (£2.45bn).

This action concealed from investors losses in 2001 and the first three months of 2002.

Their arrests follow investigations by federal authorities into the role of WorldCom executives in the company's accounting scandal.

The disclosure of dubious accounting in June resulted in the immediate sacking of Mr Sullivan and the resignation of Mr Myers.

Mr Ashcroft said the charges brought on Thursday were the product of an "extensive investigation" of WorldCom by both the Department of Justice (DoJ) and the SEC.

The attorney general added that Thursday's arrests and those that have preceded them send a "clear, unmistakable message" that corporate fraud will not be tolerated.

Market's steady hand

Mr Ashcroft said the arrests and alleged charges are a product of his agency's crackdown on corporate fraud.

SEC officials allege David Myers committed fraud

"Corrupt corporate executives are no better than common thieves when the betray their employees and they steal from their investors," he said.

"Corporate executives who cheat investors, steal savings and squander pensions will meet the judgement they fear and the punishment they deserve."

Mr Ashcroft said fraudulent transactions and falsified documents act more like a "greased palm" than a steady hand guiding the economy.

Without credible information, he said "the state of the market dissolves into a state of nature where the ruthless and corrupt profit at the expense of the truthful and law-abiding."

He also said the "vast majority" of corporate executives are hardworking and honest people.

While he would not comment on ongoing investigations at the DoJ, Mr Ashcroft did say its investigation into WorldCom, the nation's second-largest long-distance carrier, is ongoing, implying other arrests are possible.

The scale of the alleged fraud perpetrated at WorldCom has suggested to some that other company officials must have been involved.

Not yet repaid

Attention has also focused on WorldCom co-founder and - until April - chief executive Bernard Ebbers, who has not been charged with any crime.

DoJ investigations

Adelphia

Arthur Andersen

ImClone

Republic Securities

Rite Aid

Enron

Mr Ebbers borrowed $400m from the company just before it crashed, a loan that has not yet been repaid.

George W Bush, the first US president to hold a master's degree in business administration, has since deplored the practice of executives borrowing from their own companies.

Thursday's high-profile arrests follow those of executives at cable operator Adelphia last week and drug firm ImClone in June.

All have occurred before news cameras.

Some say the arrests have been staged in such as way as to show Americans the government is actively and aggressively pursuing corporate wrong-doers.