Hatch Fears WorldCom May Benefit From Its Fraud - InformationWeek

InformationWeek is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them.Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.


Hatch Fears WorldCom May Benefit From Its Fraud

The chairman of the Senate Judiciary Committee says the carrier may emerge from bankruptcy in better shape than competitors who played by the rules, and wants bankruptcy laws re-examined.

WASHINGTON (AP) -- The Senate Judiciary Committee chairman suggests in a letter to Attorney General John Ashcroft that WorldCom Inc. ultimately may benefit from its accounting fraud.

Sen. Orrin Hatch also urged the Justice Department to re-examine bankruptcy laws in light of the WorldCom case.

"According to news reports, WorldCom appears to be on track to emerge from bankruptcy in far better shape than its more responsible competitors because of the significant amount of debt that it stands to shed in bankruptcy court," wrote Hatch, R-Utah.

"If this occurs, I am concerned that WorldCom's improved position will trigger a wave of bankruptcy filings by other highly leveraged telecom companies, similar to what has occurred in the airline industry," Hatch said.

The senator asks the department to closely watch the case to ensure that the company "does not unjustly benefit from corporate wrongdoing at the expense of fraud victims, the financial markets and a competitive telecom industry."

A federal judge in New York is considering a $500 million fine against WorldCom to settle fraud charges for misstating $11 billion on corporate ledgers.

The proposed settlement with the Securities and Exchange Commission actually calls for a $1.5 billion fine, but the amount would be reduced to $500 million as part of the company's bankruptcy case.

Robert Mintz, a former federal prosecutor now in private practice, said the concern over WorldCom's financial health as it emerges from bankruptcy reflects the competing interests of those owed money by WorldCom and the company's battered shareholders.

"It's always a balancing act, but the key is not to give WorldCom an unfair advantage," said Mintz. "Obviously, Senator Hatch feels that perhaps the way this has been structured rewards them in some way for past misconduct."

But Mintz said the letter is also an attempt to press the Justice Department to go harder on companies that break the rules and then seek the haven of bankruptcy court.

Officials at WorldCom could not immediately be reached Wednesday.

We welcome your comments on this topic on our social media channels, or [contact us directly] with questions about the site.
Comment  | 
Print  | 
More Insights
Augmented Analytics Drives Next Wave of AI, Machine Learning, BI
Jessica Davis, Senior Editor, Enterprise Apps,  3/19/2020
How Startup Innovation Can Help Enterprises Face COVID-19
Joao-Pierre S. Ruth, Senior Writer,  3/24/2020
Enterprise Guide to Robotic Process Automation
Cathleen Gagne, Managing Editor, InformationWeek,  3/23/2020
White Papers
Register for InformationWeek Newsletters
State of the Cloud
State of the Cloud
Cloud has drastically changed how IT organizations consume and deploy services in the digital age. This research report will delve into public, private and hybrid cloud adoption trends, with a special focus on infrastructure as a service and its role in the enterprise. Find out the challenges organizations are experiencing, and the technologies and strategies they are using to manage and mitigate those challenges today.
Current Issue
IT Careers: Tech Drives Constant Change
Advances in information technology and management concepts mean that IT professionals must update their skill sets, even their career goals on an almost yearly basis. In this IT Trend Report, experts share advice on how IT pros can keep up with this every-changing job market. Read it today!
Flash Poll