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Throughout the latter half of 2002, WorldCom Inc. incurred the wrath of lawmakers, regulators, a former U.S. attorney general, church groups, investors and just about anyone with access to a soapbox. The company faces a courtroom showdown today with perhaps a more ominous foe, the Psychic Friends Network. Inphomation Communications Inc., which owned the network and filed for bankruptcy protection in 1998, has had a long-running dispute with WorldCom’s MCI unit over bills from 900-number pay calls. The two companies began an arbitration case in mid-2001 and were scheduled to have a hearing later in 2002 when WorldCom filed for bankruptcy protection in July, stalling the proceedings. The Chapter 11 trustee overseeing Inphomation’s bankruptcy proceedings in the District of Maryland, Paul-Michael Sweeney, states in court filings that Inphomation could be owed up to $130 million in claims and damages from WorldCom, and that the proceeds from the case are the last significant assets remaining in the debtor’s estate. He has asked U.S. Bankruptcy Judge Arthur Gonzalez, who is overseeing WorldCom’s bankruptcy case in the Southern District of New York, to lift the stay so that the arbitration case can be concluded. In its mid-’90s heyday, with TV ads featuring Dionne Warwick, the Psychic Friends Network grossed $100 million per year, according to court filings. Sweeney states that MCI employed a “full-court press” to lure the network’s business away from AT&T Corp., promising that it would save at least $6 million each year on bills. The trustee claims that WorldCom didn’t accurately reimburse its client for its bills and that Inphomation’s monthly revenues were 20 percent below projections based on its previous service with AT&T. Counsel for WorldCom has objected to Sweeney’s motion on several grounds, arguing that Inphomation’s claims are no different than “thousands upon thousands” of other general unsecured claims. The lawyers from New York’s Weil, Gotshal & Manges and Washington, D.C.-based Piper Rudnick maintain that lifting the stay would needlessly encumber WorldCom and would encourage other unsecured creditors to file similar motions. They also argue that more discovery is necessary before the arbitration case can be resolved, that experts have not been officially designated to evaluate Sweeney’s damage claims and that, in any case, Inphomation couldn’t receive its recoveries until WorldCom concludes its reorganization. �Copyright 2003, The Deal, LLC. All rights reserved.

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