Ax Falls At WorldCom

Pink slips are going out to 17,000 WorldCom workers, part of a preplanned effort to move the telecommunications giant back from the brink of bankruptcy.

On Friday, the company eliminated about 1,300 jobs in Virginia, 1,000 in Texas, nearly 700 in Maryland and 500 in Colorado. In other states, the numbers ranged from a few to a few hundred. The cuts account for about 20 percent of the work force of the Clinton, Miss.-based company, which operates in 65 countries.

The company employs 2,000 people in Mississippi. That number was reduced by about 100 on Friday.

"I'm going to miss the friends that I have inside, and I'm worried about what they're going to do," said Kimberly Spencer, a 31-year-old mother of two who lost her job in the accounting department at WorldCom headquarters.

Spencer, who cried as she described the somber mood of her co-workers, said she and others were frustrated and angry.

A Mississippi judge Thursday issued a 10-day restraining order to make sure WorldCom's former chief executive and former accountant Arthur Andersen LLP do not destroy documents related to the firm.

Federal investigators are scrutinizing WorldCom's accounting practices after the company said it wrongly listed $3.8 billion in expenses, a disclosure that has increased the threat of bankruptcy.

WorldCom CEO John Sidgmore told President Bush he was "surprised and outraged" by the accounting irregularities that could push the telephone company into bankruptcy and promised to cooperate with government investigators.

In a letter sent to Bush on Thursday, Sidgmore said the company was in "close consultation" with its banks to secure additional lines of credit so it can make interest payments on its $30 billion in "junk"-rated debt.

There are a number of financial interests, bankers included, who think that this is a company better off alive than dead, there's a lot still there worth saving, reports CBS News Correspondent Mark Strassmann. Senior executives of WorldCom reportedly are negotiating hard with bankers, trying to buy more time to get lines of credit extended.

Meanwhile, subpoenas are going out to top officials of WorldCom Inc. as Congress delves into the latest corporate scandal to shake investors' confidence and heighten political leaders' nervousness about the economy.

President Bush voiced concern Thursday about the potential economic impact of the WorldCom accounting debacle and denounced "corporate leaders who have not upheld their responsibilities." It was more tough talk from the administration amid a crisis of confidence in corporate America that could threaten a tenuous economic recovery.

The restraining order issued Thursday is in addition to one filed Wednesday by the Securities and Exchange Commission. The SEC order demands only that current WorldCom employees and affiliates preserve documents.

The court document was delivered to officials at WorldCom's Clinton headquarters along with notification for former chief executive Bernie Ebbers, although company officials have said Ebbers no longer works there. It's unlikely either has received it yet.

The doors to Arthur Andersen's downtown Jackson office were locked Thursday, preventing court officers from serving the papers, officials said.

"We have not hand delivered the order. We will continue to try to do so," said David Blount, a spokesman for Mississippi Secretary of State Eric Clark.

Clark said his office, in conjunction with Attorney General Mike Moore's office, would be "extremely aggressive" in ferreting out possible securities violations at WorldCom. The state offices are coordinating efforts with the SEC and the U.S. Attorney's Office, Clark said.

Clark said he did not know if any documents had already been destroyed at WorldCom but he has not received any reports indicating they had.

WorldCom's former chief financial officer Scott Sullivan, who was fired this week, was also named in the 10-day restraining order. As well as current WorldCom directors, employees, agents and consultants, including current auditor KPMG LLP. David Myers, a former senior vice president, was also named.

On Capitol Hill, the House Financial Services Committee issued subpoenas to compel testimony by three WorldCom officials and an influential Wall Street analyst who promoted the company's stock. The four, including Ebbers and current chief John Sidgmore, will be summoned to appear at a July 8 hearing.

The House Energy and Commerce Committee, which has been investigating the massive bankruptcies of Enron Corp. and Global Crossing, sent Sidgmore a letter Thursday asking for a number of records, including those related to a WorldCom internal audit and minutes of WorldCom's board and audit committee.

Requesting the documents be produced by July 11, Reps. Billy Tauzin and Jim Greenwood said they were "committed to learning exactly how such a massive misstatement could have occurred."

Noting that Ebbers received loans from the company totaling more than $340 million, Rep. George Miller, D-Calif., on Friday urged adoption of legislation he proposed to prohibit executives and directors from receiving company loans of more than $50,000.

The practice "has contributed to serious financial troubles and erosion of public confidence in financial markets," said Miller, senior Democrat on the House Education and Workforce Committee.

Rep. Michael Oxley, chairman of the House Financial Services Committee, who signed the subpoenas for the WorldCom officials, said, "It appears that this is good old-fashioned Fraud 101."

Oxley told CBS Radio News he's not sure if more laws or more enforcement is needed.

"We have some major problems here, it's quite obvious, and our efforts are going to try to solve those problems as quickly as we possibly can and restore order and restore our faith in the markets," he said.

He expects the WorldCom officials to show up on Capitol Hill.

"I have every reason to think that most if not all of those witnesses that we subpoenaed will come on their own volition," he said.

One reason for his committee's hearings, he said, was to restore confidence in the markets.

"I'm still of the opinion that the vast number of corporations and accountants in this country are honest and try to do a good job and do a good job, and that these situations are somewhat of an aberration," he said.