Ms. Vinson continued to cling to the notion that each transfer would be the last, says the person close to her. That hope was dashed in late April 2002. Ms. Vinson, Mr. Normand and Mr. Yates had just finished putting together the financial reports for the first quarter, which included an $818 million transfer of line costs. Shortly afterward, they made a discovery that spurred them finally to take action.
Mr. Normand and Mr. Yates were talking about WorldCom’s 2002 financial plan, a copy of which Mr. Sullivan had circulated. Mr. Normand flipped his copy over and began scribbling on the back. Mr. Normand handed his calculations to Mr. Yates, says a person close to Mr. Yates. It suddenly was clear to both men that the line-cost transfers would have to continue at least through 2002, because there was no other way the company would be able to make its projections, say several people familiar with the discussion.
The two men shared their discovery with Ms. Vinson and they all agreed that they had had enough, say two people familiar with their decision. Ms. Vinson vowed to begin looking for a new job, says the person close to her. Mr. Yates decided to launch a job search as well and Mr. Normand decided to quit but ask for a severance package, according to internal documents and one of the people close to Mr. Yates.
They made another pact as well: They would refuse to make any more improper accounting entries. Over the next few days, each of them met with Mr. Myers to tell him of their plans and their decision to make no more transfers.
In March, the SEC made a request for information from WorldCom because it was suspicious about the company’s good financial results. The company’s head of internal auditing, Cynthia Cooper, started asking Mr. Myers and others about certain accounting decisions, and the entries made by Ms. Vinson and Mr. Normand.
On the afternoon of June 17, Ms. Cooper and Glyn Smith, another auditor, walked into Ms. Vinson’s office and asked her to justify the transfers. Ms. Vinson said she couldn’t, and told them that the amounts were provided to her by Mr. Yates and Mr. Myers. She suggested that Ms. Cooper talk to them, according to internal documents released by Congress. Moments later, Ms. Cooper and Mr. Smith were in Mr. Yates’s office asking the same questions. He sent them to see Mr. Myers, according to the documents.
Ms. Vinson, Mr. Yates and Mr. Normand were in a panic, say people familiar with the situation. Mr. Yates called the other two into his office and suggested they all meet with Mr. Hollomon, the lawyer he had been referred to, according to a person close to Mr. Yates. On Thursday, June 20, at Mr. Hollomon’s downtown office, they agreed on a plan: They would meet with regulators and prosecutors, tell them everything and hope for leniency. The three each contributed $10,000 to retain Mr. Hollomon.