In June, WorldCom fessed up to concealing $3.85 billion in expenses during the first quarter of 2002 and in all of 2001 -- a revelation that shocked the financial and political establishments and quickly plunged the No. 2 U.S. long-distance carrier into bankruptcy.

The ruse allowed WorldCom to post profits instead of actual losses during that period.

Further investigation revealed that former executives started hiding expenses and artificially inflating revenue at least as far back as 1999, the company acknowledged late Thursday.

In a statement accompanied by a tabular breakout of its numbers, WorldCom said it found $3.3 billion more in improperly reported earnings, plus $500 million in "pre-tax adjustments" that brought the total of its restatements to $7.68 billion. See the statement.

WorldCom also said it probably will have to write off $50.6 billion in assets owing to the decline in value of companies it acquired.

If that number is subtracted from WorldCom's $107 billion in listed assets at the time of its filing, WorldCom's bankruptcy would represent the second largest in U.S. history after Enron. The gas-services firm listed assets of $63.4 billion when it went under.

How they did it

Under the fraudulent accounting, WorldCom (WCOEQ: news, chart, profile) treated so-called line costs as capital expenses that could be written off over a period of years.

In addition, former executives manipulated reserves -- money set aside to cover bad debt and other problems. They set aside too much and then dipped back into the reserve account to make up for gaps in projected and actual profits.

Those accounting shenanigans helped the company to hide its deteriorating financial health from investors.

Like other phone companies, WorldCom started to experience slower growth once the U.S. economy took a turn for the worse in 2000. Intensified competition in the long-distance business also undercut results

Chief Executive John Sidgmore, who took over in May after the ouster of founder Bernie Ebbers, has repeatedly warned that WorldCom might find more problems on its financial books. He said it will still be several more months before the company concludes its internal investigation.

A congressional committee probing the matter said last month also warned that the problems might extend further back. Rep. Michael Oxley, R-Ohio, charged at the time that the restatement could grow by at least $1 billion.

On June 25, WorldCom fired Scott Sullivan, the longtime chief financial officer, after the accounting fraud was discovered. A month later, the company was forced to file for bankruptcy as cash ran out, and it was promptly stripped of listing on the Nasdaq stock market.

Last week, Sullivan was arrested by federal investigators and charged with several counts of securities fraud.

The latest news is likely to rekindle questions about the role played by Ebbers, who has strenuously denied any involvement. In April, Ebbers resigned under pressure after 17 years at the helm.