Subpoenas Going Out From Congress to Top WorldCom Officials

President Bush voiced concern Thursday about the potential economic impact of the WorldCom accounting debacle and denounced "corporate leaders who have not upheld their responsibilities." It was more tough talk from the administration amid a crisis of confidence in corporate America that could threaten a tenuous economic recovery.

On Capitol Hill, the House Financial Services Committee issued subpoenas to compel testimony by three WorldCom officials and an influential Wall Street analyst who promoted the company's stock. The four, including former president and CEO Bernard Ebbers and current CEO John Sidgmore, will be summoned to appear at a July 8 hearing.

Noting that Ebbers received loans from the company totaling more than $340 million, Rep. George Miller (D-CA) on Friday urged adoption of legislation he proposed to prohibit executives and directors from receiving company loans of more than $50,000.

The practice "has contributed to serious financial troubles and erosion of public confidence in financial markets," says Miller, senior Democrat on the House Education and Workforce Committee.

The House Energy and Commerce Committee, which has been investigating the massive bankruptcies of Enron and Global Crossing, sent Sidgmore a letter Thursday asking for a number of records, including those related to a WorldCom internal audit and minutes of WorldCom's board and audit committee.

Requesting the documents be produced by July 11, Reps. Billy Tauzin (R-LA), and Jim Greenwood (R-PA), say they are "committed to learning exactly how such a massive misstatement could have occurred."

The big telecommunications company disclosed late Tuesday that it disguised nearly $4 billion in expenses from the investing public, a revelation that sent the already-weakened stock market reeling.

The Securities and Exchange Commission worked on its investigation of WorldCom after filing civil fraud charges against the company Wednesday. Seeking to prevent future abuses, the SEC on Thursday ordered large companies to provide sworn statements from their CEOs and CFOs certifying the accuracy of financial reports.

The SEC also sought to prevent the destruction of documents by WorldCom and payouts to company executives while the agency investigates. Its lawsuit in federal court in New York cites "a scheme directed and approved by...senior management" in 2001 and the first quarter of this year to manipulate earnings to keep them in line with estimates by Wall Street analysts.

The administration also has left open the possibility of a criminal investigation by the Justice Department.

Rep. Michael Oxley (R-Ohio), chairman of the House Financial Services Committee, who signed the subpoenas for the WorldCom officials, says, "It appears that this is good old-fashioned Fraud 101."

Subpoenas also are going to:

• Telecom stock analyst Jack Grubman of investment firm Salomon Smith Barney, a longtime booster of WorldCom stock who downgraded his recommendation for the company on Monday. Grubman says the downgrade had nothing to do with WorldCom's troubles.
• Lawmakers and regulators say analysts at Wall Street brokerages rated certain stocks highly so their firms could obtain lucrative investment-banking business. That business includes arranging and financing companies' first sales of stock to the public.
• Former WorldCom CFO Scott Sullivan. Fired by the company Tuesday, Sullivan appears to be at the center of the accounting mess. Among the documents requested by the Energy and Commerce Committee are records related to Sullivan.
• Bush was asked about Democrats' criticism that he is aligned too closely with corporate America and whether there will be political fallout from the WorldCom affair.
• "I'm concerned about the economic impact of the fact that there are some corporate leaders who have not upheld their responsibilities," he said at a photo session with Russian President Vladimir Putin at the eight-nation economic summit in the Canadian Rockies.
• It was the second day he addressed the WorldCom debacle at the leaders' meeting--a move that drew praise from Putin.
• "It's a very good signal," that Bush is trying to shore up jittery U.S. markets and bring openness to corporate America, Putin said.
• Bush on Wednesday termed "outrageous" the conduct of WorldCom, the nation's second-largest long-distance telephone carrier.
• "We will fully investigate and hold people accountable for misleading not only shareholders but employees as well," he said.
• Spokesmen for the company, based in Clinton, Miss., didn't return telephone calls seeking comment on the subpoenas and document request.
• In an attempt to save the paper trail behind the accounting failure, Mississippi on Thursday expanded the federal order to preserve WorldCom documents to include Sullivan, former CEO Ebbers and the company's former auditor, Arthur Andersen.
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