WHAT DID SALOMON KNOW?
Expected to testify at the hearing are WorldCom Chief Executive Officer John Sidgmore, Chairman Bert Roberts, Salomon's Grubman, and Melvin Dick, once a senior partner at former WorldCom auditor Andersen.
The WorldCom executives are expected to echo comments made last week about the importance of the company's survival to the U.S. economy and national security, according to a source familiar with their testimony. WorldCom handles about half of the world's Internet traffic and has 20 million customers.
The men at the center of the controversy, Ebbers, former Chief Financial Officer Scott Sullivan and former controller David Myers have been subpoenaed to appear at the hearing but could invoke their right not to testify.
Salomon's Grubman will likely face questions during the hearing about his downgrade of WorldCom on June 21, a Friday, to "underperform" from "neutral," days before the accounting errors became public, the congressional source said.
On June 24, a Monday, his move was made public. Some analysts alert their customers to a change in a stock rating and make it public a day later.
On the same day another Salomon analyst in the firm's bond department e-mailed then CFO-Sullivan seeking information about a rumor that WorldCom had a $3 billion liability, sources said.
Sullivan passed on the e-mail to a WorldCom lawyer, the sources said. The next day, June 25, Sullivan was fired for failing to sufficiently explain the errors. The e-mail was not replied to until after the public announcement, one of the sources said.
"The writer clearly is referring to a rumor picked up from the street that seems to have no link to the accounting fraud and nothing to do with Jack Grubman," Salomon spokeswoman Arda Nazerian said. (With additional reporting by Jessica Hall in Philadelphia.)
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