A United States federal judge appointed former U.S. Securities and Exchange Commission (SEC) Chairman Richard Breeden as corporate monitor in the civil fraud case against WorldCom Inc. on Wednesday. The case should be ready for trial by March 31.
Breeden will oversee payments made by WorldCom to its executives and employees, to prevent any unjust payouts, and will make sure that the company does not destroy or alter documents regulators and prosecutors might want as part of their investigation, WorldCom spokeswoman Anita Sannes said on Friday.
The SEC filed suit in U.S. District Court for the Southern District of New York on June 26, a day after WorldCom of Clinton, Mississippi, disclosed that it had improperly booked nearly US$4 billion in expenses, inflating its results for 2001 and the first quarter of 2002.The SEC's suit alleges that WorldCom "fraudulently portrayed itself as a profitable business by reporting earnings that it did not have." The SEC in its suit asked for the appointment of a corporate monitor as well as monetary penalties against WorldCom.
Breeden is founder of Richard Breeden & Co., a Greenwich, Connecticut, consulting firm that helps turn around troubled companies. Breeden served as SEC chairman from late 1989 until mid-1993, according to the SEC Web site.
Meanwhile, the House Financial Services Committee is set to hold hearings on WorldCom on Monday. WorldCom Chief Executive Officer John Sidgmore and other executives are scheduled to testify.
WorldCom's internal auditor, Cynthia Cooper will be heard separately, WorldCom spokeswoman Sannes said.
Cooper discovered the alleged fraud in May and met resistance from WorldCom Chief Financial Officer Scott Sullivan after she confronted him with the discovery, according to a report in the online edition of The Wall Street Journal on Friday. Sullivan was fired last week.
The U.S. Department of Justice, according to the same report, is seeking to curtail WorldCom's internal investigation and has also asked the House Financial Services Committee not to call Cooper or Max Bobbitt, chairman of the audit committee of WorldCom's board. The Justice department wants to interview executives and other potential witnesses before anyone from WorldCom talks to them, according the report.