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WorldCom Inc. faces charges, bankruptcy
By Vikas Bajaj
The Dallas Morning News
DALLAS (KRT) — The Securities
and Exchange Commission filed civil
fraud and other charges against
WorldCom Inc. Wednesday in feder
al court in New York, putting the
company a step closer to bankruptcy.
The action came a day after the
nation’s second-biggest long-dis
tance company revealed it had in
flated 2001 and first-quarter 2002
earnings by improperly accounting
for expenses.
SEC Chairman Harvey Pitt,
speaking at a news conference in
New York, said he would seek to bar
the company from destroying doc
uments or paying executives sever
ance. The agency accused the com
pany of inflating profits to please
Wall Street.
“In a scheme directed and ap
proved by its senior management,
WorldCom disguised its true oper
ating performance by using undis
closed and improper accounting
that materially overstated its in
come,” the SEC contended.
WorldCom officials couldn’t be
reached for comment Wednesday
evening.
Separately, the Justice Depart
ment said it was considering a crim
inal investigation, and U.S. Rep. Bil
ly Tauzin, R-La., said his House
Energy and Commerce Committee
would begin an investigation.
President Bush chastised the
company earlier in the day, saying
mounting corporate misdeeds were
undercutting investors confidence
in the nation’s economy and finan
cial markets.
“Today the revelations that
WorldCom has misaccounted $3.4
billion is outrageous,” Bush said in
Kananaskis, Canada, where he was
attending a summit of world lead
ers. “We will fully investigate and
hold people accountable for mis
leading, not only shareholders, but
employees as well.”
Michael K. Powell, chairman of
the Federal Communications Com
mission, said the agency was moni
toring WorldCom and he would vis
it industry officials and others in
New York to assess the impact on
the nation’s telephone system and
Internet infrastructure. MCI is
WorldCom’s long-distance division.
Experts said WorldCom will have
to declare bankruptcy to survive,
and even then the company’s future
appears bleak.
The Nasdaq stock market halted
trading in WorldCom early Wednes
day morning before the market
opened. The stock had fallen to
about a dime in pre-market trading.
It closed Tuesday at 83 cents.
Experts said WorldCom’s banks
will probably push it into Chapter
11 bankruptcy, which lets compa
nies renegotiate its debts. The com
pany was already in talks with
banks to secure a new $5 billion
credit line.
But as the company’s long-dis
tance business continues to shrink,
WorldCom will be hard-pressed to
convince bankers and other lenders
it can pay them back, let alone get a
new loan.
Before the SEC riled charges,
WorldCom spokesman Brad Bums
called talk of bankruptcy “specula
tion.” The company has previously
said it remains viable, because it
doesn’t have to pay down its $30
billion debt in the next six months.
“We are in discussion with our
bank lenders,” he said. “We are
certainly hopeful we will get their
support.”
©2002, The Dallas Morning News.
Distributed by Knight Ridder/Tribune
Information Services.
Pledge
continued from page 1
As a result of the decision, an
atheist Sacramento father’s icono
clastic, one-man legal crusade
could be transformed into one of the
most contentious church-state bat
tles to reach the U.S. Supreme Court
in years. In a 2-1 vote, the federal ap
peals court sided with his argument
that the pledge violates the Consti
tution’s strict provisions separating
church and state.
“In the context of the pledge, the
statement that the United States is a
nation ‘under God’ is an endorse
ment of religion,” wrote 9th Circuit
Judge Alfred Goodwin. It is identical,
he added, to “a profession that we are
a nation under Jesus,” a nation “un
der Vishnu,” a nation “under Zeus”
or a nation “under no god. ”
The decision, which appears des
tined for review in the Supreme Court,
was jeered by politicians and others
who warned it could serve as justifica
tion for banning the word God from
everything from U.S. currency to the
Declaration of Independence.
In a 99-0 vote, the U.S. Senate on
Wednesday backed a resolution sup
porting the pledge and instructed its
legal counsel to intervene in the case
while 100 members of Congress recit
ed the pledge on the steps of the Capi
tol. The bipartisan vitriol took direct
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aim at the 9th Circuit, a frequent tar
get of controversy over the years and
widely regarded as the nation’s most
liberal federal appeals court.
But while the reaction to the rul
ing amounted to a collective wave
of the American flag, the law might
have a less emotional response.
Even though the ruling is the first of
its kind, legal experts were quick to
point out that the Supreme Court
has on a number of occasions taken
a firm stance on keeping religion out
of schools and government.
Sixty years ago, the court made it
clear that students cannot be forced
to recite the pledge. Even conserva
tive Justice Anthony Kennedy, in a
1989 case, specifically warned in a
dissent on a different church-state
issue that the pledge might be prob
lematic for atheists.
Congress added the words “Un
der God” to the pledge in 1954, with
a declaration from then-President
Dwight Eisenhower that “millions
of schoolchildren will daily pro
claim in every city and town, every
village and rural schoolhouse, the
dedication of our nation and our
people to the Almighty, ”
Michael Newdow, who brought
the suit without a lawyer and now
finds himself squaring off against
the White House, Congress and the
U.S. Justice Department, called the
ruling “unquestionably correct.”
“It’s ironic,” Newdow said.
“Imagine having to say we’re one
nation under Buddha every morn
ing. The Christian community
would go crazy. It’s the same thing
to an atheist.”
©2002, San Jose Mercury News
(San Jose, Calif.). Distributed by Knight
Ridder/Tribune Information Services.
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