WorldCom CEO apologizes in D.C.
Chief Executive John Sidgmore treks to the nation's capital to reassure regulators, apologize publicly and pledge that financial shenanigans are a thing of the past.
In his first public appearance since WorldCom became embroiled in a $3.85 billion accounting scandal, Sidgmore acknowledged there has been an "outpouring of outrage and anger" directed at his company and promised to do whatever was necessary to regain the public's trust.
"While the deeds we uncovered were part of a past administration, I want to apologize on behalf of everyone at WorldCom," Sidgmore said.
Tuesday's press conference comes at a crucial time for the troubled telecommunications giant, which stunned Wall Street last week when it announced it had improperly accounted for nearly $4 billion in expenses, making its results for the last five quarters look much better than they actually were.
Earlier Tuesday, Sidgmore met with Securities and Exchange Commission President Harvey Pitt, who had blasted the company for giving the SEC a "wholly inadequate and incomplete" answer when asked to account for how the intentional accounting error took place. Pitt said WorldCom's five-page response was largely a timeline of events and "demonstrates a lack of commitment to full disclosure to investors and less than full cooperation with the SEC."
Sidgmore said he had agreed to "clarify our filing," cooperate closely with the SEC, and not give executives excessive payments to prevent them from leaving. He said he also met with Federal Communications Commission Chairman Michael Powell, but would not say whether the FBI or U.S. Justice Department had requested that WorldCom turn over internal documents.
At issue is more than just verbal jousting between an ailing company and Pitt, who is working to crack down on accounting problems and deflect criticism the SEC has been too lax. WorldCom, whose woes are likely to ripple throughout the tech sector, is in default with its creditors and has to convince them to invest more money so the company can restructure.
Analysts have predicted that WorldCom, which counts MCI and UUNet as its prized assets, is likely to file for bankruptcy. Sidgmore said that while WorldCom couldn't rule out a bankruptcy filing, the company had "significant cash on hand."
Sidgmore also stressed WorldCom's "commercial and national security" importance, noting that WorldCom provides Internet services to some 100 countries on six continents. "WorldCom is a key component of our nation's economy and communications infrastructure."
Sidgmore acknowledged that WorldCom's fate hinged "on what the banks do right now." While they have not demanded immediate repayment, Sidgmore said that he's working with banks to restructure WorldCom's finances, adding that creditors typically are loath to allow a company to slip into bankruptcy.
No matter what happens, Sidgmore said, there's little chance that customers will lose dial tone or Internet connectivity.
"I don't think there's much of a chance of any blip in service (or the) network going dark under any circumstances," he said. "I'm as confident as I can be that customers won't wake up without any service."
Meanwhile, WorldCom reportedly is fighting to keep its customers, which are actively being targeted by rivals such as Cable & Wireless, Sprint and SBC Communications, among others. The Bush administration said Monday that it may suspend future business dealings with WorldCom.
Sidgmore said that press reports have been exaggerated. "We have not had a single customer cancel yet despite all the histrionics," he said.
To add another wrinkle to the saga, WorldCom could be delisted from the Nasdaq as soon as Friday. WorldCom shares crumbled more than 90 percent Monday amid record trading volume of more than 1.5 billion shares. Trading was also heavy Tuesday.
Analysts said it's unclear what will happen to WorldCom or its assets. Many industry sources say WorldCom will first try to file for Chapter 11 restructuring and emerge as a slimmer company that could be acquired by one of the Baby Bells.
If that fails, WorldCom could have a high-tech garage sale. "If efforts to restructure as a going concern fail, we believe the company will be forced to liquidate its assets and distribute the proceeds to debt holders," Friedman Billings & Ramsey analyst David Marsh said.
News.com's Larry Dignan contributed to this report.