Rivals: Liquidate WorldCom
As WorldCom Inc. tries to emerge from bankruptcy with a greatly reduced debt, competitors are charging that the carrier has been unfairly supported by the government. Some other companies, which lost contract opportunities because they could not beat low WorldCom bids propped up by an $11 billion accounting fraud, are calling for the carriers liquidation.
William Barr, executive vice president and general counsel at Verizon Communications Inc., in Washington, told the Senate Judiciary Committee last month that the problem is government enforcement authorities abdicating their responsibilities regarding WorldCom, now doing business as MCI. The government is "stumbling all over itself to meet MCIs timeline and preferences as to how it wants to emerge from bankruptcy," Barr said, adding that if the company reorganizes as planned, its debt-to-sales ratio would be the lowest in the industry.
Upon convening the hearing, Senate Judiciary Committee Chairman Orrin Hatch, R-Utah, said Congress wants to determine if lessons can be learned from the WorldCom fiasco and if changes in bankruptcy law are in order.
In rivals eyes, the government has added insult to injury since the accounting fraud became known by continuing to sign big new contracts with WorldCom, in Ashburn, Va. "They have left this company with virtually all of the fruits of the crime intact. Theyve radically expanded MCIs business with the government in the months since the fraud," Barr said.
WorldCom representatives said the corruption was the product of a few bad officials who are no longer with the company and that the remaining employees and creditors should not be punished. "All these people are victims of the fraud," said Nicholas Katzenbach, a former U.S. attorney general who joined WorldComs board of directors in July 2002. Katzenbach, speaking before the committee, said he believes the call for liquidation is "a ploy to reduce competition," and the companys bankruptcy lawyer, Marcia Goldstein, with the firm of Weil Gotshal & Manges LLP, in New York, said Verizon wants to bid for WorldComs assets at a depressed value.
To union representatives, the victims include not only current and ex-WorldCom employees but also laid- off workers throughout the telecommunications sector. "WorldComs lies and false financial reports destabilized the entire telecommunications industry," said Morton Bahr, president of the Communications Workers of America, in Washington.