Banks declare WorldCom in default, SEC raps latest statement.(Chicago Tribune)

WorldCom Inc. revealed to federal regulators Monday that an internal audit has uncovered additional accounting irregularities dating as far back as 1999 and disclosed that its lenders have formally declared the company to be in default on more than $4 billion in loans.

The troubled telecom giant, which is under investigation by the Justice Department and the Securities and Exchange Commission for reporting misleading financial results over the past five quarters, called its Monday filing part of an effort "to be forthright and open."

But in Washington, where concern about the rising tide of corporate accounting scandals is running high, SEC Chairman Harvey Pitt blasted the statement from the parent of long-distance carrier MCI as "wholly inadequate and incomplete."

When WorldCom originally disclosed that it had used accounting gimmickry to overstate profits, the SEC ordered the company to file a sworn statement outlining the particulars of the accounting stunts before the start of trading Monday. WorldCom inflated profits and misled investors by concealing $3.8 billion in expenses.

Pitt said the statement "demonstrates a lack of commitment to full disclosure to investors and less than full cooperation with the SEC." He didn't offer specifics about why he considers the document unsatisfactory.

The SEC filing provides significant new details about the increasingly tense meetings among the company's internal audit team, WorldCom directors and KPMG, the accounting firm brought in two months ago to replace long-time auditor Andersen.

According to the filing, Scott Sullivan _ fired as WorldCom's chief financial officer last week _ admitted to directors after the internal inquiry got underway that his $3.8 billion in improper accounting should be cleared up. However, Sullivan argued that the company should do so by taking a one-time accounting writedown rather than take the more painful action of restating earnings for the latest five quarters. Directors didn't agree.