WorldCom CEO apologizes for firm's 'past transgressions'

Tuesday, July 2, 2002

AP Business WriterWASHINGTON (AP) -- The chief executive officer of beleaguered WorldCom Inc. apologized Tuesday for "past transgressions" at the firm, and pledged cooperation as the government probes accounting irregularities that totaled billions of dollars.

At the same time, John Sidgmore firmly laid the blame for any wrongdoing at the feet of the "past administration," evidently a reference to the firm's founder, Bernard J. Ebbers.

Sidgmore said that despite the huge telecommunications firm's deteriorating situation, he hoped to avoid bankruptcy. He said WorldCom has about $2 billion in available cash.

He also said that despite wide publicity given the company's difficulties, it had not yet suffered the loss of a major customer.

WorldCom disclosed last month it had improperly accounted for nearly $4 billion in expenses, thus inflating its earnings. The disclosure sent the company's stock plummeting, prompted the SEC to file fraud charges and triggered an avalanche of anger from politicians -- President Bush included.

Sidgmore began his news conference by taking note of an "understandable outpouring of outrage and anger," but he firmly insisted that the management team he heads had worked from the outset to make the facts public.

"It was this company that audited our auditors. It was this company that turned ourselves in. ... It is this management team that will take this company forward and restore public confidence," he said.

That remained to be seen.

The company's stock is to be delisted on NASDAQ on Friday. And Harvey Pitt, the chairman of the Securities and Exchange Commission, has derided as "wholly inadequate and incomplete" a sworn statement in which the company explained how it had masked the $4 billion.

The statement, which the SEC had demanded from the company, "demonstrates a lack of commitment to full disclosure to investors and less than full cooperation with the SEC," Pitt said.

Whatever the impact on the firm itself, the WorldCom debacle had robbed thousands if not millions of investors of retirement funds, and changed the political landscape in Congress.

Bush has repeatedly expressed outrage at the firm's behavior in recent days. And Senate Majority Leader Tom Daschle has announced that legislation to crack down on corporate irresponsibility will be the first order of business when lawmakers return to the Capitol next week.

"We completely agree with the president on this and I am committed to operating WorldCom with the highest possible standards of ethics and integrity," Sidgmore said.

Despite Pitts' criticism, WorldCom defended its report as an accurate accounting of what happened.

"We were very surprised by (Pitt's) comments," company spokesman Brad Burns said Tuesday. "Based on the SEC order and conversations with SEC staff, we believe they were clear on what we would be able to provide at this time. Our response was entirely in line and is in fact a summary of what we know at this point."

Defense Secretary Donald H. Rumsfeld, said he doesn't believe WorldCom's shaky financial situation poses a risk for the Pentagon, which uses some of the company's communications systems.

"I think it's not to be a problem," he said in response to a reporter's question.

The General Services Administration, which oversees federal contracts, said Monday that it was reviewing all of WorldCom's government contracts.

In the latest development as WorldCom's travails grew, the state comptroller in New York asked a federal court Tuesday to allow him to lead a shareholder lawsuit against the company, some of its executives and its former auditor, Arthur Andersen LLP.

The state's pension fund has lost some $300 million on its investment in WorldCom stock -- the biggest loss in the history of the $112 billion fund. "We must hold corporate officials who commit fraud accountable," said the comptroller, H. Carl McCall.

The Nasdaq Stock Market said it would remove shares of WorldCom from trading starting on Friday. Investors pummeled WorldCom stock, which plunged 90 percent to 6 cents a share in Monday's early trading after a three-day halt that followed its disclosure of accounting irregularities.

By noon Monday, WorldCom -- which once topped $64 a share -- had become the most heavily traded stock in a single day in U.S. history as the markets tumbled again.

During the day, 1.47 billion shares of WorldCom traded, at prices as high as 15 cents and as low as 5 1/2 cents. Sales were in the 6-cent range Tuesday.

Bush, who has denounced irresponsible corporate behavior nearly every day since the WorldCom affair came to light, said in a speech in Cleveland on Monday: "By far the vast majority ... of corporate America are aboveboard and doing their jobs just the way you'd expect them to do. ... It's also important to know we're going after those who aren't and hold them accountable."

WorldCom, which owns MCI, is second only to AT&T in the long-distance market.

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