LONDON, June 26: Shares in the London stock market took a deep plunge on Wednesday in reaction to a massive accounting scandal from US giant WolrdCom.

More than 35 billion pounds wiped from shares in just few hours as traders reacted to a massive accounting scandal at the WorldCom.

The market, already racked with post-Enron nerves, slumped after the telecoms giant reported that it disguised $3.8 billion (2.5 billion pounds) in expenses in what appears to be one of the largest cases of accounting fraud ever.

The falls are slightly less than the slump on September 11, when the Footsie fell 5.72 per cent — which was the last time the index fell by more than 4 per cent in one day. The Footsie on Wednesday was down 188.1 points at 4,442.9, a fall of 4 per cent and its lowest since September 21. However, by midday it had pulled back slightly, down 150.6 points at 4480.4.

Just one Footsie share managed to rise, and among the sea of red, banks, telecoms and tech stocks were hard hit. Vodafone, Cable & Wireless, mmO2 and BT all fell between 3 per cent and 6 per cent.

Agencies add: Global markets reeled on Wednesday after US long-distance carrier WorldCom Inc. shocked investors with its disclosure of a $3.8 billion accounting scandal, one of the largest in history.

WorldCom, the second-biggest US long-distance telecoms group, on Tuesday night fired its Chief Financial Officer Scott Sullivan and said it would restate its results for the last five quarters, erasing all profits from the beginning of 2001.

The news further soured investor confidence after such once high-flying companies as energy trading company Enron Corp., telecom giant Global Crossing and conglomerate Tyco International crashed on a lack of accounting transparency.

“This is just another nail in the coffin of confidence,” said Paul Marsch, a London-based Morgan Stanley telecoms analyst.

Stock markets reeled from Asia to Europe to the United States, with already beleaguered telecoms stocks touching new, historic lows. The spectre of bankruptcy cast its shadow over WorldCom, once an aggressively acquisitive US group whose stock appeared to defy gravity in the boon times of the late 1990s.

Trading in WorldCom shares, which peaked at more than $64 in 1999, was halted after they lost nearly all of their remaining value in pre-market trade, plunging to 9 cents a share.

The scandal over how WorldCom falsely booked expenses to boost profits rocked shares of other telecommunications stocks, as well as equipment manufacturers, advertising agencies, banks and insurers which had exposure to WorldCom.

Tokyo’s Nikkei stock average tumbled 4 per cent to close at a four-month low, and the pan-European FTSE Eurotop 300 index was off by a similar amount about 1-1/2 hours ahead of Wall Street’s opening bell.

US stock indices fell on the opening bell, with the tech-heavy Nasdaq falling 3.2 per cent to 1,378.74, and the Dow Jones industrial averaging tumbling 2 per cent to 8,947.61.

WorldCom, which already was under investigation by the US Securities and Exchange Commission (SEC), said it discovered the accounting problem during a routine internal audit. The news could derail its efforts to secure $5 billion in financing, without which it may face a cash-crunch next year, or even bankruptcy, analysts said.

The Clinton, Mississippi-based company, which switched auditors from Andersen to KPMG this year, said it booked operating expenses such as routine network maintenance as capital investments, which allowed it to hide expenses, inflate cash flow and artificially post profits.

The SEC ordered a detailed report from the company, while The Washington Post newspaper said the Justice Department had begun a criminal probe.

“The WorldCom disclosures confirm that accounting improprieties of unprecedented magnitude have been committed in the public markets,” the SEC said in a brief statement.

WorldCom promptly announced plans to axe 17,000 jobs, or more than 20 per cent of its work force, starting Friday. The move will save about $900 million a year.

RATING CUT TO CC: Fitch Ratings cut its ratings on WorldCom Inc. on Wednesday, a day after the phone group said it improperly booked almost $4 billion in expenses in what could be one of the biggest cases of accounting fraud in US history.