06:55 PM

Hatch Fears WorldCom May Benefit From Its Fraud

The chairman of the Senate Judiciary Committee says the carrier may emerge from bankruptcy in better shape than competitors who played by the rules, and wants bankruptcy laws re-examined.

WASHINGTON (AP) -- The Senate Judiciary Committee chairman suggests in a letter to Attorney General John Ashcroft that WorldCom Inc. ultimately may benefit from its accounting fraud.

Sen. Orrin Hatch also urged the Justice Department to re-examine bankruptcy laws in light of the WorldCom case.

"According to news reports, WorldCom appears to be on track to emerge from bankruptcy in far better shape than its more responsible competitors because of the significant amount of debt that it stands to shed in bankruptcy court," wrote Hatch, R-Utah.

"If this occurs, I am concerned that WorldCom's improved position will trigger a wave of bankruptcy filings by other highly leveraged telecom companies, similar to what has occurred in the airline industry," Hatch said.

The senator asks the department to closely watch the case to ensure that the company "does not unjustly benefit from corporate wrongdoing at the expense of fraud victims, the financial markets and a competitive telecom industry."

A federal judge in New York is considering a $500 million fine against WorldCom to settle fraud charges for misstating $11 billion on corporate ledgers.

The proposed settlement with the Securities and Exchange Commission actually calls for a $1.5 billion fine, but the amount would be reduced to $500 million as part of the company's bankruptcy case.

Robert Mintz, a former federal prosecutor now in private practice, said the concern over WorldCom's financial health as it emerges from bankruptcy reflects the competing interests of those owed money by WorldCom and the company's battered shareholders.

"It's always a balancing act, but the key is not to give WorldCom an unfair advantage," said Mintz. "Obviously, Senator Hatch feels that perhaps the way this has been structured rewards them in some way for past misconduct."

But Mintz said the letter is also an attempt to press the Justice Department to go harder on companies that break the rules and then seek the haven of bankruptcy court.

Officials at WorldCom could not immediately be reached Wednesday.

Comment  | 
Print  | 
More Insights
Newest First  |  Oldest First  |  Threaded View
2014 Next-Gen WAN Survey
2014 Next-Gen WAN Survey
While 68% say demand for WAN bandwidth will increase, just 15% are in the process of bringing new services or more capacity online now. For 26%, cost is the problem. Enter vendors from Aryaka to Cisco to Pertino, all looking to use cloud to transform how IT delivers wide-area connectivity.
Register for InformationWeek Newsletters
White Papers
Current Issue
Top IT Trends to Watch in Financial Services
IT pros at banks, investment houses, insurance companies, and other financial services organizations are focused on a range of issues, from peer-to-peer lending to cybersecurity to performance, agility, and compliance. It all matters.
Twitter Feed
InformationWeek Radio
Archived InformationWeek Radio
Join us for a roundup of the top stories on for the week of July 17, 2016. We'll be talking with the editors and correspondents who brought you the top stories of the week to get the "story behind the story."
Sponsored Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.