Jun 25, 2003 (02:06 PM EDT)
Hatch Fears WorldCom May Benefit From Its Fraud
Read the Original Article at InformationWeek
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.