WorldCom on Tuesday severed some of the few remaining ties with its scandal-ridden past when the six directors associated with the telecommunications group’s $9bn accounting fraud resigned from its board.
The departures come a day after two New York judges approved the appointment of Michael Capellas as WorldCom’s new chairman and chief executive. The former computer executive has pledged to restore standards of integrity and good corporate governance at the company to the highest possible levels.
“These actions show that WorldCom is absolutely committed to establishing the highest standards of ethics and integrity at all levels throughout the organisation,” Mr Capellas said.
The departing directors include former chief executive John Sidgmore and former chairman Bert Roberts. Both men were closely associated with the regime of disgraced chief executive Bernard Ebbers, who stepped down in April, and former chief financial officer Scott Sullivan, who has been charged with fraud.
The other four board members who stepped down were non-executive directors Carl Aycock, Max Bobbitt, Francesco Galesi and Gordon Macklin. Another director, Judith Areen, resigned last week.
Mr Aycock helped Mr Ebbers found LDDS, the predecessor company to WorldCom, and the two men still have close private business links. Mr Bobbitt was the chairman of WorldCom’s audit committee who was first alerted to the possibility of the accounting fraud by Cynthia Cooper, the company’s chief internal auditor.
The resignations, which had been widely expected, clear the way for Mr Capellas to rebuild the company’s board with directors untainted by the largest accounting fraud in US corporate history. At the time of his appointment last month Mr Capellas suggested the company would appoint a director for governance and nominations who could oversee the hiring of new non-executive directors.
MatlinPatterson Associates, a distressed debt investor which is a large holder of WorldCom’s bonds, has suggested installing Rudolph Giuliani, New York’s former mayor, as the company’s chairman.
Mr Capellas aside, WorldCom’s board now consists of three directors, all of whom were appointed after the accounting scandal was revealed.
It is unclear whether the departing board members will be implicated in the accounting fraud or will be liable for any litigation against the company. The Securities and Exchange Commission recently announced a partial settlement of its case against WorldCom.
“It is now appropriate for each of us to stand down as directors and give [Mr Capellas] the opportunity to continue the process we have started to put in place substantive reforms and best governance practices,” the directors said on Tuesday.