WorldCom Inc., which shook the financial world last week when it announced a nearly US$4 billion restatement of its financial reports for 2001 and the first quarter of 2002, Monday filed documents demanded by U.S. Securities and Exchange Commission (SEC), as well as the Nasdaq stock market. The company said that its stock could be removed from the Nasdaq as early as July 5.
WorldCom said that it, together with its auditor KPMG LLP, is looking into the company's books for 1999 and 2000 to determine whether further actions are required.
A WorldCom spokeswoman confirmed Monday that the company's internal investigation into the matter, headed by former SEC officer William McLucas, began over the weekend. The spokeswoman was unable to provide further details, but a story in Monday's Wall Street Journal reported that McLucas questioned current WorldCom Chief Executive Officer John Sidgmore over the weekend and was seeking to question recently-resigned WorldCom CEO Bernie Ebbers.
On June 25, WorldCom announced that it would have to restate its 2001 and part of its 2002 financial statements due to accounting irregularities. The company had been improperly booking expenses as capital investments. As a result of the announcement, the Clinton, Mississippi, company fired its Chief Financial Officer Scott Sullivan and accepted the resignation of Senior Vice President and Controller David Myers.
The revelations sent WorldCom's stock into a tailspin, with trading on it halted overnight Tuesday after its value had dipped below $0.20. The Nasdaq stock market ordered the company to file informational documents by Monday. On Monday, WorldCom said that it had received notice from the Nasdaq that it had failed to comply with the market's requests and could be delisted by the end of the week unless WorldCom requested a hearing.
Trading in the company's stock (Nasdaq: WCOME) was reopened Monday. The markets treated it badly, sending the stock down $0.77, or 93 percent, to close at $0.06, on 1.5 billion shares traded.
The documents filed with the SEC Monday were ordered by the regulatory body on Wednesday. The SEC also filed suit against WorldCom to prevent the company from destroying documents that might be used in an investigation or from paying extraordinary bonuses to executives. On Friday a chancery court judge in Mississippi issued a temporary restraining order against the company and its current auditor, KPMG, past auditor Arthur Andersen LLP, and its current and former employees barring them from destroying documents. WorldCom, which is operating under the load of a nearly $30 billion debt, began laying off 17,000 workers on Friday. The layoffs, which were announced before the company's financial revelations, are expected to save the firm $900 million per year.
The holders of some of WorldComs' loans notified the company Monday that events constituting default had occurred and that the loan holders were exercising rights that could speed up the repayment schedule on two loans, one of $2.65 billion, the other of $1.6 billion, WorldCom said in the statement. If the holders of 51 percent of the loans vote to take such action, the loans could become immediately due, WorldCom said.
Also Monday, Electronic Data Systems Corp. (EDS) attempted to assure investors that its relationship with WorldCom would not adversely affect the company's financial health. EDS provides technology services to WorldCom under a $6.4 billion contract, which is expected to contribute $160 million to $175 million to EDS' revenues in the second half of 2002, the company said. EDS is also a customer of WorldCom's telecommunication services.