WCOME.The rise could be a result of short-sellers covering their positions, or others speculating WorldCom could get additional credit lines and avoid bankruptcy, one analyst said.
NEW YORK (Reuters) - A federal judge set a March trial date on Wednesday for scandal-plagued telecommunications group WorldCom Inc. on alleged securities fraud and named a former top regulator to oversee that no key documents are shredded and no excessive payouts are made to top officers.
The Clinton, Mississippi-based company saw its shares more than double in Nasdaq trading, albeit only going to 22 cents from 10 cents, a day after new Chief Executive John Sidgmore apologized for the scandal and tried to stem the company's hemorrhaging.
U.S. District Judge Jed Rakoff set March 31 as the tentative date for the Securities and Exchange Commission to begin presenting its case accusing WorldCom (NASDAQ:WCOME) of violating securities laws by covering up $1.22 billion in losses by improperly booking $3.85 billion in expenses.
The SEC is seeking unspecified monetary penalties and to bar the company from violating securities laws again.
Rakoff also appointed Richard Breeden, a former head of the Securities and Exchange Commission, to ensure no documents are destroyed by the company and that no payments that exceed $100,000 are made to current or former executives.
"I want a hands-on monitor who will report to me what's going on," Rakoff said, adding that Breeden will be free to "look into every nook and cranny to fulfill his function."
Breeden's appointment follows allegations that bankrupt energy trader Enron Corp.'s (ENRNQ.PK) auditor, Andersen ANDR.UL, and telecommunications provider Global Crossing Ltd. (GBLXQ.PK) shredded documents that could have shed light on the companies' accounting methods. Enron also awarded bonuses to key staffers as the energy company's problems deepened.
A WorldCom spokeswoman declined to comment on the judge's move.
WorldCom's Sidgmore on Tuesday tried to allay fears on Wall Street that the company would file for bankruptcy protection or break up its core assets, but he made clear that its position was dependent on negotiations for new credit lines.
"This (bankruptcy) is not our preferred path," he told reporters during a 45 minute grilling by 100-plus reporters on Tuesday. "And I think, fundamentally, the real issue hinges on what the banks do right now."
Despite its woes, the company staved off a delisting of its two tracking stocks that was set for Friday by appealing Nasdaq's claim that WorldCom no longer met the requirements.
SHARES MOVE UP, SPECULATIVE?
WorldCom, which is the No. 2 U.S. long-distance telephone and data services company and has operations in 65 countries, carries about half of all e-mails in the world and 70 percent of all e-mails in the United States .
Shares of WorldCom Group, which tracks the company's data services operations, shot up to 29 cents at the open of regular trading, after closing at 10 cents on Tuesday.
The stock pared gains to close up 12 cents, or 120 percent, at 22 cents, with 1.02 billion shares trading hands. The shares of MCI Group, which track the carrier's consumer long-distance operations, closed up 16 cents, or 48.5 percent, at 49 cents.
The rise could be a result of short-sellers covering their positions, or others speculating WorldCom could get additional credit lines and avoid bankruptcy, one analyst said.
"I don't think there's any value in the equity," said Patrick Comack, who at Guzman & Co. has a "sell" rating on the shares and does not own any WorldCom stock. "I guess some people are speculating they might be able to get new credit lines and avert bankruptcy."
In addition to negotiating new lines of credit, Sidgmore also must fend off congressional investigations, a review by the U.S. Justice Department and the SEC lawsuit.
WorldCom is also looking for errors in its 1999 and 2000 financial statements.
WorldCom executives, including Sidgmore, ex-CEO Bernard Ebbers and former Chief Financial Officer Scott Sullivan, who was fired for his role in the scandal, are to testify before the U.S. House Financial Services Committee at 1 p.m. (1700 GMT) on Monday.
'EYES AND EARS'
Rakoff said was pleased with the initial efforts by WorldCom to cooperate. He said that part of Breeden's responsibilities as monitor is to make sure WorldCom assets are not affected by unnecessary payments, including salaries, severance payments, bonuses, gifts and loans.
Breeden was selected from a list of candidates agreed upon by the SEC and WorldCom. After the hearing, Breeden told reporters he expected to start his work immediately.
"I'm not there to replace the company's management, I'm there to be the eyes and ears of the court," he said.
Breeden will also make sure that WorldCom has developed document retention policies and has complied with them.
Breeden served as SEC chairman from 1989 to 1993 and now runs his own firm, which specializes in corporate workouts and distress situations, as well as strategic consulting in corporate governance, accounting and disclosure issues.
(With additional reporting by Jeremy Pelofsky in Washington) |
