- The Washington Times - Wednesday, August 27, 2003

OKLAHOMA CITY (AP) — Oklahoma prosecutors yesterday filed the first criminal charges against former WorldCom Inc. chief Bernard Ebbers, part of a wider complaint that also named the bankrupt telecommunications company now known as MCI and other one-time top executives.

The complaint accuses Mr. Ebbers, the other executives and the company of breaking state securities laws by giving false information to investors in 2000. WorldCom collapsed into the nation’s largest bankruptcy last year amid an accounting scandal that has grown to $11 billion.

“It is rare that we name a company in a criminal complaint, but in this case it is justified,” Oklahoma Attorney General Drew Edmondson said, adding that the WorldCom debacle cost the state pension fund $64 million.

Other state attorneys general say they are considering following suit, to the irritation of federal authorities. The Justice Department and Securities and Exchange Commission yesterday said they were “disappointed” about the Oklahoma lawsuit and said it could hurt their own efforts to pursue WorldCom executives.

“We hope that the Oklahoma Attorney General’s actions will not jeopardize the criminal cases being prosecuted by the U.S. Attorney’s Office or the ongoing investigations” of Mr. Ebbers and other officers, the SEC said in a statement.

The SEC last year levied its largest-ever civil penalty against WorldCom, and Justice indicted its former chief financial officer, Scott Sullivan, and several other junior executives, but has not taken any action against Mr. Ebbers.

Although these are the first criminal charges against Mr. Ebbers and the company itself, other former WorldCom executives have been charged in federal court, including ex-Chief Financial Officer Scott Sullivan, who was also named in the Oklahoma complaint.

Four other ex-executives who have pleaded guilty to federal charges and are helping federal prosecutors are also charged in Oklahoma: David Myers, Buford Yates Jr., Betty Vinson and Troy Normand.

The charges against the former executives — who have one week to appear voluntarily in court in Oklahoma City — carry up to 10 years in prison and a $10,000 fine. The company could be fined.

Mr. Ebbers’ attorney, Reid Weingarten, said he expects Mr. Ebbers to be exonerated. He pointed out that federal investigators have spent more than a year digging into WorldCom without charging Mr. Ebbers.

“This is not because of any lack of prosecutorial zeal,” Mr. Weingarten said. “Rather, it is because of a total lack of any evidence that Mr. Ebbers committed crimes. It is not apparent … what the local Oklahoma authorities think they have uncovered that the federal authorities have overlooked.”

Also yesterday, Oregon sued MCI in hopes of recouping the $24 million loss on WorldCom bonds that were bought by three state investment funds. The lawsuit also accuses bond underwriter Salomon Smith Barney of helping WorldCom mislead investors.

No criminal charges are planned in Oregon, but attorney general spokesman Kevin Neely said that option was being left open.

These cases come as MCI is trying to move on from the accounting scandal, which has already led to a $750 million settlement with the Securities and Exchange Commission.

The company has changed its name, moved its headquarters to Ashburn, Va., and hired new leadership. On Tuesday, court-appointed monitor Richard Breeden, a former SEC chairman, established several protections for shareholders that MCI will adopt in a new corporate charter.

MCI’s general counsel, Stasia Kelly, said she does not believe the Oklahoma charges will affect the bankruptcy process.

“Today’s action against the company would only punish our 20 million customers and 55,000 employees — 2,000 of which work in Oklahoma,” Ms. Kelly said in a statement. “MCI has made tremendous progress over the past year and we are working hard to put our house in order.” She added that the company is “committed to doing all the right things to ensure what happened in the past can never happen again.”

However, Mr. Edmondson said the company has not “purged itself of wrongdoing” in bankruptcy. Rivals of MCI, the No. 2 long-distance carrier after AT&T; Corp., have made similar complaints, since MCI will emerge from bankruptcy with its debts dramatically reduced.

“I don’t think this company has been punished,” Mr. Edmondson said. “I think it’s been rewarded for its bad acts.”

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