MCI given green light to sue Ebbers, consultants

A court-appointed examiner today found that MCI has legal recourse against the executives who led the former WorldCom down its road of financial scandal and against the financial and consulting companies that assisted them.

Investigator Richard Thornburgh, a former U.S. attorney general appointed by a federal bankruptcy judge, has now filed three reports examining the roles of former CEO Bernie Ebbers and other top WorldCom executives as well as investment bank Citigroup, auditor Arthur Andersen and tax advisor KPMG in the carrier’s accounting fraud. Though Thornbugh fingered several controversial and questionable actions by the individuals and organizations, today’s report was the first indicating MCI could sue them for reparations.

In a statement issued today, MCI said it would consider possible lawsuits recommended by the report, but so far had made no decisions over what actions to take, except that it would not pursue a case against KPMG. MCI officials said the company’s own audit of its financial advisors found that tax programs recommended by the firm in 1997 and 1998 were appropriate. The other targets listed in the report, however, seemed fair game.

"We are already in the process of evaluating many of the potential claims raised by the Examiner as part of our own assessment, and will forward with the actions that we determine appropriate, represent a prudent use of company resources and have a strong likelihood of positive outcome," said MCI executive vice president and general counsel Stasia Kelly in the statement.

MCI is in the penultimate stages of its Chapter 11 proceedings, having had its bankruptcy reorganization plan approved by the court last year. It is expected to emerge this quarter, practically free of debt with a new board and executive structure in place. As its final measures before emergence, MCI has been releasing a backlog of financial data restating previous years’ earnings and releasing its performance metrics through bankruptcy. Last week, MCI offered up guidance for 2004, projecting revenues between $21 billion and $22 billion, down 10% to 12% from 2003’s expected results.