UNITED STATES OF AMERICA
In the Matter of
BUFORD YATES, JR.,
|ORDER INSTITUTING ADMINISTRATIVE PROCEEDINGS PURSUANT TO RULE 102(e) OF THE COMMISSION'S RULES OF PRACTICE, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS|
The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public administrative proceedings be, and hereby are, instituted against Buford Yates, Jr. ("Yates") pursuant to Rule 102(e)(3) of the Commission's Rules of Practice.1
In anticipation of the institution of these proceedings, Yates has submitted an Offer of Settlement (the "Offer"), which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, prior to a hearing pursuant to the Commission's Rules of Practice, 17 C.F.R. §201.1 et seq., and without admitting or denying the findings herein, except as to the Commission's jurisdiction over him and the subject matter of these proceedings, and the findings contained in Section III.3. below, which are admitted, Yates consents to the entry of this Order Instituting Administrative Proceedings Pursuant to Rule 102(e) of the Commission's Rules of Practice, Making Findings, and Imposing Remedial Sanctions ("Order"), as set forth below.
On the basis of this Order and Yates' Offer, the Commission finds that:
1. Yates, age 46, was a certified public accountant licensed to practice in the State of Mississippi from approximately 1988 until January 1, 1999, when he failed to renew his license. From in or about 1997 until terminated by WorldCom, Inc. ("WorldCom") on August 28, 2002, Yates served as WorldCom's Director of General Accounting.
2. WorldCom was at all relevant times a Georgia corporation with principal offices in Clinton, Mississippi. It provided a broad range of communications services to both U.S. and non-U.S. based businesses and consumers. At all relevant times, WorldCom's common stock was registered with the Commission pursuant to Section 12(g) of the Securities Exchange Act of 1934 ("Exchange Act"), and traded on the Nasdaq National Market System.
3. On November 14, 2002, a judgment was entered against Yates, by consent, permanently enjoining him from violating Section 17(a) of the Securities Act of 1933 and Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5 and 13b2-1 thereunder, and aiding and abetting violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder, in a civil action in the United States District Court for the Southern District of New York, entitled Securities and Exchange Commission v. Buford Yates, Jr., Civil Action Number 02 CV 7958 (JSR). Yates was also barred from serving as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act or that is required to file reports pursuant to Section 15(d) of the Exchange Act. The determination of the amount of civil penalties, if any, and/or disgorgement, if any, to be paid by Yates in that civil action will be made at a later date.2
4. The Commission's complaint alleged, among other things, the following: at the direction of WorldCom senior management, Yates and other WorldCom employees caused WorldCom to overstate materially its earnings in contravention of generally accepted accounting principles ("GAAP") for at least seven successive fiscal quarters, from as early as October 2000 through April 2002. In the third and fourth quarters of 2000, at the direction of WorldCom senior management, Yates and others improperly decreased reserves and line costs by corresponding amounts to overstate pre-tax earnings by $828 million and at least $407 million in the respective quarters. Then, from the first quarter 2001 through the first quarter 2002, at the direction of WorldCom senior management, Yates and others improperly capitalized line costs to overstate pre-tax earnings by approximately $3.8 billion. Yates knew, or was reckless in not knowing, that these entries were made without supporting documentation, were not in conformity with GAAP, were not disclosed to the investing public, and were designed to allow WorldCom to appear to meet Wall Street analysts' quarterly earnings estimates.
In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanction agreed to in Yates' Offer.
Accordingly, IT IS HEREBY ORDERED, effective immediately, that Yates is suspended from appearing or practicing before the Commission as an accountant.
By the Commission.
Jonathan G. Katz
|1|| Rule 102(e)(3)(i) provides, in relevant part, that:
The Commission, with due regard to the public interest and without preliminary hearing, may, by order, . . . suspend from appearing or practicing before it any . . . accountant . . . who has been by name . . . permanently enjoined by any court of competent jurisdiction, by reason of his or her misconduct in an action brought by the Commission, from violating or aiding and abetting the violation of any provision of the Federal securities laws or of the rules and regulations thereunder.
|2||On October 7, 2002, in an action filed in the United States District Court for the Southern District of New York, Yates pleaded guilty to one count of conspiracy to commit securities fraud, in violation of 18 USC §371, and one count of securities fraud, in violation of 15 USC §78j(b), and 17 CFR 240.10b-5.|
|Home | Previous Page||