In an announcement that rekindled memories of the recent Enron scandal, WorldCom, the nation's No. 2 long-distance carrier, revealed Tuesday it had overstated its earnings by nearly $4 billion. According to the company, more than $3 billion of expenses in 2001 and $797 million this year were wrongly listed as capital expenses and not reflected in WorldCom's earnings results.

At the center of the scandal is Arthur Anderson LLP, WorldCom's auditor during the period in question. Anderson was convicted of obstruction of justice for its role in the Enron scandal earlier this month. Upon hearing the news, President Bush told the media that a joint SEC and government investigation would be launched immediately. Bush did not rule out the possibility of a Justice Department inquiry as well.

In response, WorldCom, the owner of long-distance provider MCI, fired its chief financial officer, Scott Sullivan, and revealed plans to lay off more than 17,000 employees in an effort to cut back on expenses and avoid bankruptcy. The Clinton, Mississippi company is at risk of losing more that $5 billion in lender financing.