Justice Dept wants independent examiner in WorldCom case

Associated Press WriterWASHINGTON (AP) -- The Justice Department has asked a federal judge to appoint an independent examiner in the WorldCom bankruptcy case, an agent who would be in charge of investigating the downfall of the company for mismanagement, irregularities and fraud.

The case was to be considered by U.S. Bankruptcy Judge Arthur J. Gonzalez.

The request, which was filed Monday by U.S. Trustee Carolyn Schwartz, would give the examiner subpoena power to investigate the company's transactions. WorldCom has agreed with the request from Schwartz, according to court documents.

Attorney General John Ashcroft said an independent examiner would improve public confidence.

"This action will provide transparency to the process and enhance accountability," he said. "In turn this should increase public confidence in the conduct of the case and help preserve value and protect the creditors and shareholders, including small creditors and those whose pension funds are invested in WorldCom.

The request for appointment of an independent examiner indicates the government believes that step is needed to protect WorldCom shareholders' interests through the bankruptcy process. An examiner, who would be accountable to the court and not to the creditors' committee, was appointed in Enron Corp.'s ongoing bankruptcy case to investigate the energy-trading company's collapse.

An examiner can also turn relevant material over to the Justice Department if this person discovers activities by company executives believed to warrant investigation.

The crash of telecommunications giant WorldCom is the subject of a separate criminal investigation by the Justice Department.

Faltering under debt, the telecommunications giant filed for bankruptcy protection Sunday night, nearly a month after it disclosed almost $4 billion in deceptive accounting.

WorldCom's staggering $30 billion debt load had forced it to seek Chapter 11 protection.

An independent examiner would issue a report within 90 days after appointment, according to a Justice Department official close to the case. Charges could be filed based on the examiner's findings.

The Clinton, Miss.-based WorldCom admitted June 25 that it falsely accounted for $3.85 billion in expenses, which had the effect of inflating profits. That day, it fired chief financial officer Scott Sullivan, who was subsequently accused by the company's auditor, Arthur Andersen, of withholding crucial information about WorldCom's bookkeeping.

WorldCom's stock price traded as high as $64.50 in June 1999. However, shares of WorldCom and other telecommunications companies have slid with the dot-com bubble burst and other market forces that caused an industrywide implosion.