Once again, Richard Thornburgh is stepping into the heart of a corporate-misconduct
In the late 1980s and early 1990s, then-U.S. Attorney General Thornburgh oversaw the investigation of the savings and loan scandal and the indictment of former junk bond king Michael Milken.
Now a lawyer at Washington firm Kirkpatrick & Lockhart LLP, Thornburgh was picked by the Justice Department to serve as the independent examiner to look into WorldCom Inc.’s collapse, the biggest corporate failure ever.
For starters, Thornburgh plans to assemble a strong team of professionals with extensive accounting knowledge, experienced in probing corporate fraud, and working on government investigations.
Thornburgh’s main task is to investigate allegations of fraud, incompetence, misconduct, mismanagement, or irregularities by WorldCom’s current or former management. He is expected to file his initial report with the bankruptcy court within 90 days of his appointment.
“Again, my rule of thumb applies — ‘we go where the evidence leads,'” Thornburgh said in an interview with Dow Jones Newswires.
He will work closely with Richard Breeden, a former Securities and Exchange Commission chairman who was appointed by a federal judge last month to act as a monitor for the court in the SEC’s civil fraud suit against WorldCom for alleged accounting improprieties.
Clinton, Miss.-based WorldCom disclosed on June 25 that it incorrectly booked $3.8 billion in expenses and falsely posted profits over a five-quarter period beginning in early 2000. Besides the SEC, both houses of Congress are conducting investigations into the company.
The Justice Department, right after WorldCom filed for Chapter 11 protection on July 21, sought the bankruptcy court’s permission to create the examiner position. Thornburgh’s findings could be of significant consequence to WorldCom’s creditors and shareholders, who lost billions in the dramatic downfall of the telecom company.
To a larger extent, the examiner in such a high-profile case also inevitably shoulders the responsibility of restoring public confidence in corporate America. “One of the best ways to restore confidence when wrongdoing is committed,” Thornburgh said, is for the perpetrators to be “actively pursued.”
Thornburgh is well known among his peers for his fairness, integrity and down-to-earth work style. His nomination, which faced no objection and was approved by bankruptcy judge Arthur Gonzalez late Tuesday, has been greeted with enthusiasm by fellow lawyers.
Robert Fiske Jr., a senior member of the law firm Davis Polk & Wardwell’s litigation department, said Thornburgh’s experience as a prosecutor “qualified him more than anything else for the (WorldCom examiner) job.”
“He’s very direct, no-nonsense, and very thorough,” adds Fiske, who served as the U.S. Attorney for the Southern District of New York when Thornburgh was in charge of the criminal division in Washington.
Thornburgh, 70, started his public service in 1969, when he was appointed as U.S. Attorney for the Western District of Pennsylvania. The Pittsburgh native served as attorney general from 1988 to 1991, spanning two Republican administrations, Presidents Reagan and Bush. Before that, he was a two-term governor of Pennsylvania, elected first in 1978 and again in 1982.
“For people coming out of a political position, they tend to be a lightening rod for criticism,” says H. Rodgin Cohen, a leading financial-services lawyer with Sullivan & Cromwell in New York. Thornburgh, by comparison, “is highly respected irrespective of his ideological stance,” says Cohen.
Cohen recalls that about seven years ago, when he and Thornburgh walked through the Justice Department, greetings beginning with “General Thornburgh” were everywhere, even though he wasn’t necessarily in politically friendly territory.
“That was during a democratic administration,” Cohen said.
Not surpassingly, Thornburgh’s appointment was also hailed by the current administration.
Attorney General John Ashcroft called his predecessor “a person of integrity and independent stature.” In a statement, Ashcroft said he is confident that Thornburgh “will examine carefully all the facts and file with the court a report that will help bring these cases to an appropriate resolution.”