Federal judge appoints monitor to keep detailed watch on WorldCom
Wednesday, July 3rd 2002, 12:00 am
By: News On 6
NEW YORK (AP) _ A judge appointed a former head of the Securities and Exchange Commission to act as the corporate monitor for WorldCom, telling him to ``look into every nook and cranny'' of the troubled company.
U.S. District Judge Jed Rakoff tapped Richard Breeden, who was chairman of the SEC from 1989 to 1993, as the monitor in the SEC's civil fraud suit against WorldCom over accounting improprieties.
WorldCom is struggling to avoid bankruptcy since announcing last week that it improperly accounted for nearly $4 billion in expenses, which inflated its financial results.
``I want a hands-on monitor who will report what's going on (and) ... feel free to look into every nook and cranny to fulfill his function,'' Rakoff said.
Breeden, who runs a company that tries to rescue failing comapnies, will be paid $800 an hour for his WorldCom work, the judge said.
His chief duties will be to prevent destruction of company documents, and to make sure employees _ especially top executives _ aren't given huge payouts while the company struggles to stay afloat.
``I'm not there to replace company management,'' said Breeden. ``I'm there to be the eyes and ears of the court.''
Before he can assume the job, Breeden must sell roughly 6,000 shares he owns in WorldCom, which have become virtually worthless, trading at 14 cents Wednesday on the Nasdaq Stock Market.
Rakoff also set a tentative trial date in the SEC action for March 21.
At a news conference Tuesday to discuss WorldCom's troubles, chief executive John Sidgmore blamed WorldCom's past management and the embattled company's former auditor, Arthur Andersen LLP, and pledged that an internal inquiry would ``find the guys that did wrong here.''
Sidgmore, who took over in April, said he could not rule out the possibility of bankruptcy for the nation's second-largest long-distance carrier and said more cost cuts were likely.
He said WorldCom has about $2 billion in cash.
Asked about possible layoffs in addition to the 17,000 employees the company has let go from its work force of 80,000, Sidgmore told reporters: ``We want to run this business to be operating cash-flow positive. ... And so, we're committed to doing whatever it takes to make that happen.''
Sidgmore apologized for ``past transgressions'' at the company and pledged cooperation as the government investigates.
``We want the bad guys exposed,'' Sidgmore said. ``We want the bad guys punished. And we want to move on with our lives at WorldCom.''
Sidgmore said he did not know if WorldCom's founder and former CEO Bernard Ebbers had any prior knowledge of the $4 billion hole in the company's books.
As for Scott Sullivan, the former chief financial officer fired by the company last week, Sidgmore said: ``No single operating unit knows what's going on in the rest of the organization, and it all came together at Scott Sullivan's level.''
Sidgmore referred to Andersen several times.
``They swear up and down that they didn't know anything about this,'' he said. ``We internally are a little bit concerned that they didn't know anything about it, because if it was going to be obvious to anyone it should've been obvious to them.''
Clinton, Miss.-based WorldCom, which owns MCI Communications, is second only to AT&T in the long-distance market and controls a large part of the Internet's backbone. IDT Corp., a provider of long-distance services and parent of Net2Phone, an Internet-based telephone service, said Tuesday it has offered about $5 billion for MCI and some other WorldCom units.