UC Sues 2 Firms Over WorldComFeb 14, 2003 | The San Francisco Chronicle The University of California regents filed a lawsuit Thursday accusing Salomon Smith Barney and Arthur Andersen of helping WorldCom Inc. to defraud its investors, resulting in a $353 million loss to the university pension plan.
In a suit filed in San Francisco Superior Court, the regents charged the financial and accounting firms with engaging in a "scheme to defraud" by inflating the value of WorldCom stock with loans and equity investments.
Citigroup, the parent company of Salomon Smith Barney, also was named in the suit.
"We're familiar with the allegations and believe them to be without merit," said Susan Thomson, a spokeswoman for Smith Barney, formerly Salomon Smith Barney.
Several similar class-action suits arising from the WorldCom collapse have been filed and consolidated in a New York federal court.
Burlingame attorney Joseph Cotchett, who filed Thursday's suit on behalf of the regents, said they chose to file a separate suit in state court because they want to litigate the case in California.
"We believe very strongly that the board of regents, the University of California professors and all of the employees of the University of California are entitled to a jury trial before their neighbors," he said.
The 91-page complaint charges that beginning in 1994, Salomon Smith Barney and Arthur Andersen helped WorldCom overvalue assets, improperly record extraordinary charges, engage in sham barter transactions and book the same sales twice.