WorldCom's Sidgmore rules out aid

"We are fighting for our life. I am confident that we will pull this company through and turn it around -- one way or another." John Sidgmore, Chief Executive of WorldCom PHOTO: REUTERS

WorldCom Inc Chief Executive John Sidgmore said he has no plans to ask for government aid as he seeks to rescue the second-largest US long-distance phone company from a US$3.9 billion accounting scandal.

That's the only option he ruled out as he testified before lawmakers for three hours yesterday. He said the company has a "number of proposals coming together" from banks as it tries to renegotiate debt and get new financing. Some of the scenarios could force WorldCom to file for bankruptcy protection, he said.

"We are fighting for our life," Sidgmore told the House Financial Services Committee. "I am confident that we will pull this company through and turn it around -- one way or another."

Sidgmore a barrage of questions from lawmakers about WorldCom's accounting, inquiries that were exacerbated by the silence of the two executives that led the company into crisis.

Former Executive Bernard Ebbers and fired Chief Financial Officer Scott Sullivan refused to talk to legislators, invoking their constitutional right against self incrimination.

Lawmakers to know from Sidgmore and Chairman Bert Roberts how the Clinton, Mississippi-based company hid US$3.9 billion in costs for more than five quarters and what the company would do to ensure similar actions don't occur in the future.

"Many questions still remain," Sidgmore told the panel.

"We won't know the answers until the conclusion of the pending investigations."

The Securities and Exchange Commission has charged the company with fraud and is investigating its accounting. The Justice Department and at least two committees in Congress have also opened inquiries.

WorldCom hired William McLucas, former chief of enforcement for the SEC, to conduct an independent evaluation of the company's bookkeeping. He is coordinating with the Justice Department and SEC on the probe and has agreed to let the agencies interview some witnesses before he does, Sidgmore said.

WorldCom also trying to recruit new board members, he said. Lawmakers said the company's directors were too beholden to management, criticizing them for approving more than US$400 million in loans to Ebbers and giving him a lifetime salary of US$1.5 million a year when he was ousted in April.

"Instead of fighting for the life of the company aren't you fighting for the lifestyle of the executives?" asked Representative Max Sandlin, a Texas Republican.

The harshest words were spent during a five-hour grilling of Ebbers, Sullivan, former Arthur Andersen LLP auditor Melvin Dick and Salomon Smith Barney analyst Jack Grubman. Sandlin wanted to hold Ebbers in contempt of Congress for refusing to testify while others ridiculed Grubman and Dick for failing to catch the misstatement of expenses.

"The magnitude of WorldCom's deception is staggering" and "dealt a new blow to market confidence," said Representative John LaFalce, a New York Democrat.

The WorldCom debacle led President George W. Bush to call for prison terms for errant executives in a speech he'll deliver today in New York. The House and Senate are considering competing proposals to tighten regulations of corporate accounting.