An Post to keep WorldCom deal under review

 

State company An Post is to keep under review a contract worth up to €2 million, which it signed just last month with US telecoms group WorldCom.

Officials of WorldCom, which is on the edge of bankruptcy, have been subpoenaed to appear before a US Congressional hearing to answer questions about the massive $3.8 billion (€3.86 billion) fraud discovered at the company on Tuesday.

WorldCom employs 180 people in Dublin and has 6,000 high-end customers in the Republic, one of which is An Post.

A spokesman for An Post said yesterday the firm would keep the contract under review following recent events at WorldCom. But he said the postal service's view was that the firm would not walk away from the contract, and WorldCom had a good presence here.

An Post agreed a two-year contract for the supply of voice telecoms services to all of its post offices in the Republic, following a lengthy tender process. It beat off competition from several other companies for the voice contract, which is expected to be worth up to €2 million over two years.

Meanwhile, the Securities and Exchange Commission (SEC) has also filed a civil suit against WorldCom, alleging that the near-bankrupt telecommunications company engaged in improper accounting to "manipulate its earnings to keep them in line with Wall Street's expectations, and to support WorldCom's stock price".

The SEC also specifically ordered WorldCom and its executives and directors not to destroy, alter or remove any documents related to the alleged fraud. It has demanded that no severance or bonus payments be made to officers, directors and employees during the investigation.

A "corporate monitor" would be appointed to ensure these orders were carried out, said SEC chairman Mr Harvey Pitt, who ordered WorldCom to file under oath a detailed public report before the market opens on Monday on its restatements of earnings.

The officials summoned to Washington are former WorldCom chief executive Mr Bernie Ebbers, current chief executive Mr John Sidgman and chief financial officer Mr Scott Sullivan, who was fired when the fraud was announced on Tuesday evening.

A Wall Street analyst, Mr Jack Grubman of Solomon Smith Barney, has also been ordered to appear before the committee on July 8th, to answer questions about his upbeat advice to investors about WorldCom stocks even as the company was under investigation and its $32 billion debt had been relegated to junk bond status.

The US Justice Department is reported to have set up an investigation that could result in criminal charges against WorldCom and Mr Sullivan, including securities fraud, bank fraud and mail fraud. Mr Pitt has also taken the extraordinary step of ordering top executives at the 1,000 largest publicly traded companies in the US to vouch for the accuracy of their recent financial statements.

The SEC complaint against WorldCom, the second-largest US telecoms company with 20 million customers and 80,000 employees, was filed in a federal court in Manhattan.

It alleges that WorldCom senior management used improper accounting in 2001 and through the first quarter of 2002 to inflate 2001 earnings by $3 billion and first-quarter 2002 earnings by $797 million.

The complaint alleges that WorldCom executives transferred fees for use of transmission networks by other companies into capital accounts to boost earnings.

The Wall Street Journal revealed yesterday that an internal auditor, Ms Cynthia Cooper, was the first to spot the $3.8 billion accounting irregularities as she trawled through records in response to an SEC investigation set up in February.

In April, WorldCom directors ousted Mr Ebbers, who was mired in controversy over a $408 million loan from WorldCom to meet margin calls on loans secured by company stock. Mr Ebbers is under scrutiny in the current fraud investigation.