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Ebbers Might Not Collect His Pension

Oct 8, 2002 | Bloomberg News

WorldCom Inc.'s board of directors may revoke the $1.5 million annual pension awarded to former Chief Executive Officer Bernard Ebbers after he resigned in April, people familiar with the matter said.

The board, scheduled to meet today in Washington, also will discuss finding a replacement for current CEO John Sidgmore and proposals to sell assets to pay creditors of the largest bankruptcy in U.S. history, the people said.

The plan to sell assets and possibly cancel some payments to Ebbers is aimed at helping the second-biggest U.S. long-distance phone company emerge from Chapter 11.

The pension payments have angered some investors because the company later disclosed it had failed to properly account for at least $7 billion in expenses.

Ebbers "shouldn't get any more than a common employee," said John Krause, an analyst at Thrivent Financial, which owned 647,571 WorldCom shares as of June 30 as part of the $57 billion in assets it has under management.

"If employee pensions and 401(k)s have been wiped out because of the drop in WorldCom stock, there's no reason he shouldn't be wiped out too."

WorldCom's board last month heard a report from Richard Breeden, a court-appointed monitor, on Ebbers' lifetime pension and the terms of a $408.2 million loan that he received from WorldCom.

The loan, which Ebbers has agreed to repay in installments over five years, was the subject of a U.S. Securities and Exchange Commission probe announced in March.

Revoking Ebbers' pension would be more of a symbolic gesture than a substantial cost savings, said Jeff Kagan, an independent telecommunications analyst based in Atlanta.

A pension of "$1.5 million a year for the rest of Ebbers's life doesn't even amount to a rounding error for a multibillion dollar company like WorldCom," Kagan said.

"The board will make their decision based on how important they think it is to send the message to the markets that the old days of fraud and scandal are behind them."

Breeden, a former SEC chairman who was appointed by U.S. Trustee Carolyn Schwartz to monitor WorldCom's compensation during bankruptcy, didn't return phone messages to his office in Connecticut.

Ebbers's attorney Reid Weingarten declined to comment. Weingarten said he may decide to comment today, depending on what the board decides.

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