Ex-WorldCom executives arrested

Sullivan: Faces fraud charges in connection with WorldCom misstatements

NEW YORK (CNN/Money) -- Scott Sullivan, the WorldCom chief financial officer who was fired when the company revealed a $3.8 billion accounting error, surrendered Thursday to federal authorities in Manhattan, where he faces charges of securities fraud, a source told CNN.

Sullivan is being held at U.S. federal court in Manhattan along with David Myers, WorldCom's former controller.

CNN has confirmed that a criminal complaint will be unsealed Thursday charging both men with seven counts of securities fraud and seven counts of conspiracy to commit securities fraud in connection with WorldCom's misstatement of $3.8 billion in expenses.

Just before 10 a.m. ET, Sullivan and Myers were led out in handcuffs from the FBI building in lower Manhattan en route to facing the expected charges.

Apparently absent from the complaint was Bernhard Ebbers, WorldCom's former CEO who resigned in April. Ebbers and Sullivan exercised their constitutional rights against self-incrimination last month when they declined to testify before a House panel investigating the scandal.

The charges come during a crackdown on white-collar crime. Federal agents last week arrested the founder of cable television company Adelphia on charges of looting the company of hundreds of millions of dollars. The Justice Department is investigating Enron, ImClone Systems and Qwest Communications.

On June 25, WorldCom revealed that it hid the $3.8 billion in expenses over 15 months starting last year. Since then, Clinton, Miss.-based WorldCom, the No. 2 long-distance phone service provider, has cut thousands of jobs, been delisted by Nasdaq, and filed the biggest bankruptcy in history on July 22.

WorldCom has vowed to emerge from that bankruptcy next year.