X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Two long-awaited investigative reports on previous misconduct at WorldCom Inc. were released late Monday afternoon. The documents, which totaled more than 600 pages, were primarily backward-looking and centered on the actions of the bankrupt telecommunications company’s former management. WorldCom’s court-appointed examiner, Richard Thornburgh, a former U.S. attorney general now at law firm Kirkpatrick & Lockhart, issued a second interim report that focused on corporate governance and spent less time on the accounting questions that were at the center of WorldCom’s fraud. The other report, which came from a special investigative committee of WorldCom’s board, took up accounting issues as well as other matters. Thornburgh stated that his review had not been completed and that another report would be necessary. For instance, the examiner’s team still has not been able to interview ousted CEO and co-founder Bernie Ebbers and former CFO Scott Sullivan. The second interim report included interesting commentary on the dealmaking culture at WorldCom under Ebbers, which it called “ad hoc and opportunistic” with “little meaningful or coherent strategic planning.” “Several multibillion-dollar acquisitions were approved by the board of directors following discussions that lasted for 30 minutes or less and without the directors receiving a single piece of paper,” the report said. One “particularly troubling” deal was the $6 billion September 2000 acquisition of Intermedia Communications Inc. The Thornburgh report quoted a former director who described it as an “ego deal” undertaken after “approximately 60-90 minutes of due diligence and a 35-minute telephonic board meeting.” The director stated that “God himself could not have made the decision in one day,” according to the report. The examiner’s report also cited concerns about “the allocation of assets, debt and expenses” between the WorldCom holding company and the MCI Group subsidiary, which is the main operating unit. Separately, a special committee appointed by WorldCom’s board published its findings Monday on the events leading to the Securities and Exchange Commission’s lawsuit. Wilmer, Cutler & Pickering was counsel to the committee, and PricewaterhouseCoopers LLP served as financial adviser. “The fraud did not involve WorldCom’s network, its technology or its engineering,” the special committee wrote. “Most of WorldCom’s people did not know it was occurring.” The committee placed most of the blame at the feet of Ebbers and a few other top executives and members of the financial and accounting departments. “Though much of this report details the implementation of the fraud by others, [Ebbers] was the source of the culture, as well as much of the pressure, that gave birth to this fraud,” the report said. The committee concluded that WorldCom had already made many of the necessary changes and that the people responsible for the fraud were gone. WorldCom chief executive Michael Capellas, who was named in late 2002 well after the fraud, echoed that sentiment Monday. “No one even arguably associated with the past wrongdoing continues to work at the company,” Capellas said in a press release. “The issuance of these reports is yet another important step in putting the past behind us as we remain on a fast track to emerge from Chapter 11 protection this fall.” WorldCom will attach a summary of the report to its disclosure statement. Later this week U.S. District Judge Jed Rakoff of the Southern District of New York will hold a hearing on WorldCom’s $500 million settlement with the SEC. Rakoff said that before approving the settlement he would have to review the reports by Thornburgh and the special committee, among other matters. Copyright �2003 TDD, LLC. All rights reserved.

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.