- The Washington Times - Thursday, July 4, 2002

NEW YORK (AP) A former Securities and Exchange Commission chairman was appointed court monitor of WorldCom Inc. yesterday to ensure documents aren't destroyed and executives don't receive outsize payouts from the faltering communications giant.
U.S. District Judge Jed Rakoff in Manhattan selected Richard Breeden, who headed the SEC from 1989 to1993, to act as the court-appointed monitor in the SEC's civil fraud suit against WorldCom for 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.
Meanwhile, the Justice Department has begun a preliminary investigation of the company, according to a department official who spoke on the condition of anonymity. Such a probe would look for any evidence of criminal wrongdoing by WorldCom executives.
Judge Rakoff selected Mr. Breeden for the high-profile position from a pool of three candidates submitted by lawyers for both sides. The other candidates were not named in court. Judge Rakoff also set a tentative trial date in the SEC action for March 21.
"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," Judge Rakoff said.
Mr. Breeden, who currently runs a company that tries to rescue failing firms, will be paid $800 an hour for his WorldCom work, the judge said.
His chief duties will be to prevent any destruction of company documents and make sure employees especially top executives aren't given massive payouts while the firm struggles to stay afloat. Both were volatile issues in the collapse of energy trader Enron Corp., which paid out millions in last-minute bonuses to executives before filing for bankruptcy last December. Arthur Andersen LLP, which was both Enron and WorldCom's auditor, was recently convicted of one count of obstruction of justice for destroying documents to related to its work for Enron.
"I'm not there to replace company management," said Mr. Breeden. "I'm there to be the eyes and ears of the court."
Before he can assume the job, Mr. Breeden must sell roughly 6,000 shares he owns in WorldCom, which have become virtually worthless, closing at 22 cents yesterday on the Nasdaq Stock Market. The shares had traded as high as $16 in the past 12 months.
WorldCom's troubles have prompted an unsolicited $5 billion bid to buy its MCI long-distance business, the nation's No. 2 carrier behind AT&T;, and major Internet assets.
The bid Tuesday came from IDT Corp., a much smaller provider of long-distance and other communications services and the parent company of Net2Phone, an Internet-based telephone service.
WorldCom spokesman Brad Burns said yesterday that the company would "consider any serious offers, but it's highly unlikely that we would consider selling our core assets such as MCI."
WorldCom paid $37 billion in 1998 for MCI.
Drake Johnstone, an analyst with Davenport & Co. in Richmond, said considering that WorldCom defaulted on $4.25 billion in bank loans this week, he's not sure the company is in a position to negotiate such a deal.
"I think the bankers are driving the bus right now," Mr. Johnstone said.

Sign up for Daily Newsletters

Manage Newsletters

Copyright © 2020 The Washington Times, LLC. Click here for reprint permission.

Please read our comment policy before commenting.


Click to Read More and View Comments

Click to Hide