WASHINGTON-Long before WorldCom Inc. admitted to billions in accounting fraud, it was trying to become a major wireless carrier by reselling service from Verizon Wireless. As part of that scheme, Verizon Wireless resold some of WorldCom’s telecommunications services.
Then the tech bubble burst, and WorldCom imploded and went bankrupt. It’s first course of action after declaring bankruptcy was to get out of wireless.
That was the end of the story until the Dow Jones Newswire reported that Aug. 22 WorldCom made a filing with its bankruptcy court saying it had settled an outstanding dispute with Verizon Wireless.
What?
It seems WorldCom and Verizon Wireless each claimed the other still owed it money from before the bankruptcy filing, and Verizon also believes it is owed money post bankruptcy.
In what appears to be crazy math, Verizon Wireless would pay WorldCom $4.7 million to satisfy the $46.2 million WorldCom believes it is owed, but WorldCom will not pay anything. Instead Verizon Wireless will have a $7.6 million general unsecured claim to be paid, according to its plan of reorganization.
Parties objecting to the filing had until last Thursday to do so. The bankruptcy judge has scheduled a hearing for today.
Okla. files charges
In anther punch thrown at the operator, WorldCom now must face the wrath of the states. Oklahoma last week filed a criminal complaint including 15 felony charges against the company; Bernard Ebbers, its founder and former chief executive officer; and five other former employees.
“It looks like WorldCom is being patted on the back and rewarded,” said Oklahoma Attorney General Drew Edmondson. Edmondson is a former president of the National Association of Attorneys General and was active in the tobacco lawsuits in the 1990s.
Federal investigators, who so far have not brought criminal charges against either Ebbers or WorldCom, were unhappy with the Oklahoma action.
“Regarding the charges announced today in the State of Oklahoma, this office has not been contacted for evidence or access to witnesses in our active investigation into WorldCom and its accounting fraud. In the name of cooperation and coordination, we are disappointed that we were not told that charges were imminent,” said the U.S. Attorney for the Southern District of New York, which is leading the federal WorldCom investigation. “Competing interests can impede and delay the administration of justice. We are hopeful Oklahoma’s action will not interfere with the prosecution of the five individuals already charged, four of whom have pled guilty and are awaiting sentencing.”
WorldCom said that Oklahoma’s action will only hurt its customers and the 2,000 employees who live in that state.
Oregon filed a $24 million civil suit against the company and its underwriters, saying that three state investment funds, including the Oregon Public Employees Retirement Fund, invested money in WorldCom bonds based on the fraudulent accounting records.
WorldCom has agreed to a $750 million settlement with the SEC that will allow some investors to recoup some losses.
Ebbers was forced out of the company he founded shortly before the accounting misdeeds were revealed by the company.
Neither the Oklahoma action nor the Oregon action is expected to delay WorldCom’s bankruptcy proceedings, which are scheduled to start Sept. 8. If WorldCom successfully emerges from bankruptcy, it will change its name to MCI Inc.
Richard Breeden, the former chairman of the Securities and Exchange Commission, which has been reviewing WorldCom’s business practices, said he doesn’t think the recent allegations from Verizon Communications Inc. and AT&T Corp. that MCI-both before and after its merger with WorldCom-illegally routed calls will delay the process.
In addition to owning SkyTel Paging, MCI recently won a contract to provide mobile-phone service to government and military officials in Baghdad.
