United States Securities and Exchange Commission
Litigation Release No. 17771 / October 7, 2002
Accounting and Auditing Enforcement Release No. 1642 / October 7, 2002
SEC Charges Former WorldCom Director of General Accounting Yates
Securities and Exchange Commission v. Buford Yates, Jr., Civil Action No. 02 CV 7958 (JSR)
The Securities and Exchange Commission today filed a civil enforcement action against Buford "Buddy" Yates, Jr., formerly the Director of General Accounting of WorldCom, Inc., and a CPA. The Commission charges that Yates participated in a massive fraud that inflated the company's earnings at the direction and with the knowledge of WorldCom's senior management. Also today, in connection the same conduct, Yates pleaded guilty to criminal charges filed by the U.S. Attorney's Office for the Southern District of New York.
The Commission's action against Yates is its third civil enforcement action related to the WorldCom fraud. The first was filed against WorldCom, Inc. on June 27 of this year. (Litigation Release No. 17588.) The Commission sought, among other things, the appointment of a corporate monitor, and on July 3, U.S. District Court Judge Jed S. Rakoff appointed former Commission Chairman Richard Breeden to that position. The Commission's second enforcement action was filed against former WorldCom Controller David F. Myers on September 26. (Litigation Release No. 17753.)
Yates is charged with violating numerous provisions of the federal securities laws, including the antifraud, books and records, and internal controls provisions (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 and 13b2-1 thereunder). It further charges him with aiding and abetting WorldCom's violations of the periodic reporting, books and records, and internal controls provisions (Exchange Act Sections 13(a) and 13(b)(2)(A) & (B) and Rules 12b-20, 13a-1 and 13a-13 thereunder). The Commission seeks a permanent injunction, disgorgement of all ill-gotten gains, civil money penalties, and an order barring Yates from serving as an officer or director of a public company.
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.
The Commission's investigation into matters related to WorldCom's financial fraud is continuing.