The New York state pension fund sued WorldCom Inc. (NasdaqNM: WCOM – News) and accounting firm Arthur Andersen LLP over a $300 million loss the pension fund has suffered in the wake of the embattled telecommunications company’s accounting problems.
New York Comptroller H. Carl McCall filed the shareholder suit against WorldCom and its former auditor in federal court in Manhattan. The loss was the biggest loss in the history of the $112 billion state pension fund. By comparison, the New York pension fund lost about $75 million in the collapse of Global Crossing Ltd. ( GX – News) , a fiber-optics company which has filed for bankruptcy- court protection.
WorldCom, Clinton, Miss., had no immediate comment.
Meanwhile, Chief Executive John Sidgmore said during a news conference Tuesday in Washington that WorldCom has more than $2 billion in cash and that a bankruptcy filing isn’t imminent.
In his first live, public comments since the company announced it would have to restate 2001 and first-quarter 2002 results due to a $3.8 billion misallocation of routine expenses as capital expenditures, Mr. Sidgmore said the company is currently working with various banks to restructure the company’s finances.
“We think we’ll get a proposal in this week,” he said. Later, he added that ” all the banks are in negotiations to see if we can’t refinance all of these loans.”
Mr. Sidgmore planned the Washington conference amid what appears to be mounting pressure to be more forthcoming about his role in the affair. Mr. Sidgmore, who replaced Bernard J. Ebbers after the founder was ousted in late April, previously said he is working on a complete review of the company’s financials.
News of the New York pension fund suit comes a day after the nation’s No. 2 long-distance carrier announced that it had discovered what could be additional accounting problems. These possible errors could add at least another $1 billion to the company’s financial revisions, people familiar with the matter said. Last week, WorldCom said it expected to restate by $3.8 billion its financial results for 2001 and part of 2002.
Wall Street increasingly expects the company to file for what would be the largest bankruptcy in U.S. history. WorldCom’s stock Monday fell more than 90% to six cents a share in its first day of trading on the Nasdaq Stock Market since it disclosed its planned financial restatement last week. WorldCom also said it received notice from Nasdaq that it will be delisted on Friday.
Mr. McCall said the pension fund’s private managers were duped by WorldCom. ” We must hold corporate officials who commit fraud accountable,” Mr. McCall said. “I am seeking to lead the suit against WorldCom and Arthur Andersen on behalf of the nearly one million members of the New York State Pension Fund and all the other investors who lost millions of dollars.
“These corporate abuses threaten the integrity of our financial system and I will not let these outrageous actions go unchallenged,” Mr. McCall said.
Mr. McCall, as sole trustee of the pension fund, has been a lead plaintiff in shareholder lawsuits against McKesson HBOC, Inc., Raytheon Co. (Boston: RTN.B – News) , Chubb Corp. (NYSE: CB – News) and Cendant Corp. (NYSE: CD – News)