US judge bars WorldCom staff from destroying documents

A US judge yesterday barred WorldCom employees from destroying documents or receiving payments of more than $100,000 (€101,420), and said he would appoint a monitor to oversee document retention and compensation to officers or employees.

US District Judge Jed Rakoff signed an order proposed by the Securities and Exchange Commission (SEC) in its suit alleging that WorldCom defrauded investors through improper accounting.

Judge Rakoff asked lawyers representing the SEC and WorldCom to propose three names by a hearing on Wednesday from whom he will choose the corporate monitor.

The order provides that the monitor will have oversight responsibility to prevent "unjust enrichment" and to ensure WorldCom assets are not dissipated by payments that are not necessary to the operation of its business.

Until a corporate monitor is in place, WorldCom is prohibited from making any payments greater than $100,000 to any present or former officer, director or employee. The monitor will also confirm that WorldCom has implemented document-retention policies and that the company has complied with these policies.

WorldCom held talks with its banks yesterday to secure new funding and more lenient terms on its existing credit pacts as it tried to deflect political criticism over its $3.85 billion accounting scandal.

WorldCom chief executive Mr John Sidgmore told President George Bush he was "surprised and outraged" by the accounting irregularities that allowed it to hide $1.2 billion in losses over the past five quarters. Mr Sidgmore pledged the company would co-operate with government investigators, who have demanded testimony and corporate records.

In a letter sent to President Bush on Thursday and made public yesterday, Mr Sidgmore said the company was in "close consultation" with its banks to secure additional lines of credit so it could make interest payments on its $30 billion in "junk"-rated debt.

The discovery of improper accounting could prompt its lenders to demand immediate repayment of its loans, which would likely force the company into bankruptcy even though it has about $2 billion cash on its books.

WorldCom discovered the problem last week during a routine internal audit. The scandal rivals the collapsed Enron and casts further doubt on auditor Andersen, which was convicted of obstructing an Enron probe and vetted WorldCom's books until being fired this year.

The company plans to restate results, erasing profits since the beginning of 2001. Two congressional committees also subpoenaed testimony and documents from WorldCom executives.

Mr Bush, angered at relentless scandals in US boardrooms, said yesterday that corporate America had a responsibility to be aboveboard instead of trying to "fudge the numbers".