Congress Subpoenas WorldCom Execs

Congress planned to subpoena Thursday current and former WorldCom Inc. executives as U.S. officials vowed to tighten accounting regulations and President Bush said he was worried about the economic fallout of the recent wave of accounting scandals.

The House Financial Services Committee was set to summon WorldCom Chief Executive John Sidgmore and former boss Bernie Ebbers for a July 8 hearing. The company faces bankruptcy after being charged with fraud for improperly booking ordinary expenses, a move that allowed it to post $1.38 billion in net income in 2001, instead of a loss.

The panel also planned to subpoena WorldCom's recently fired financial director Scott Sullivan, and Salomon Smith Barney telecommunications analyst Jack Grubman, who long trumpeted WorldCom to investors before cutting his rating a day before the Clinton, Mississippi company disclosed the scandal.

President Bush demanded a full investigation into a scandal that rivals the collapse of bankrupt energy trader Enron Corp. and casts further doubt on auditor Andersen, which was convicted for obstructing an Enron probe and vetted WorldCom's books until being fired this year.

"I'm concerned about the economic impact of the fact that there are some corporate leaders who have not upheld their responsibility," Bush told reporters ahead of a meeting with Russian President Vladimir Putin during a summit in Canada of the Group of Eight nations.

Bush said he was worried about the economic consequences of accounting scandals at U.S. corporations, and urged executives to "fully disclose all assets and liabilities and ... your shareholders and employees with respect."

WorldCom hired investment bank Blackstone Group to help it in a potential restructuring, a source familiar with the situation said on Thursday.

Pension funds across the nation that invested in WorldCom are feeling the effects of the drop in the stock, which has dropped from $15 in January to under $1 currently.

Meanwhile, WorldCom chief executive John Sidgmore promised "aggressive" changesaggsaid he'll continue to plan for the company's future.

Sidgmore called revelations that the company had hidden $3.8 billion in expenses from investors "a shock" and "an undeniable setback" for the nation's No. 2 long distance provider.

But Sidgmore said he was moving forward with plans to make the company leaner, a process that will involve laying off as many as 17,000 people. He said the sale of certain assets and other cost-cutting measures would be forthcoming – but he didn't mention what many analysts believe to be an inevitable bankruptcy filing.

"We're going to continue to make the kinds of aggressive changes that are required to strengthen this company," said Sidgmore, who replaced ousted WorldCom founder Bernie Ebbers in April.

One of those changes was the firing of former chief financial officer Scott Sullivan, who appears to be at the center of the accounting disclosure.

U.S. officials echoed the president's outrage about WorldCom and said corporate leaders should be prosecuted to the full extent of the law. U.S. Treasury Secretary Paul O'Neill said in some ways regulations needed to be strengthened.

The shockwaves that rocked global markets over WorldCom's improper accounting of $3.85 billion in ordinary expenses eased on Thursday but officials intensified their calls for reform.

O'Neill said the people responsible for the WorldCom mess should be prosecuted to the full extent of the law. He said the U.S. Securities and Exchange Commission, which on Wednesday filed charges against WorldCom for manipulating earnings, should be given the right to freeze the accounts and assets of officials implicated in scandals such as WorldCom.

"In cases like this, the SEC even would be able to go in and freeze accounts and freeze assets, so while some of these things are being litigated the money doesn't run away and it can be redistributed to employees and shareholders."

White House economic adviser Lawrence Lindsey said the administration is backing a $250 million increase in funding for the SEC, the U.S. agency charged with protecting investors and maintaining the integrity of the securities markets.

"We have to follow up on a lot of these abuses and clean them up and the president has come up with tougher corporate governance standards," Lindsey said in an interview broadcast on CNBC on Thursday.

On Wednesday, the SEC filed a civil lawsuit against WorldCom, alleging it hid expenses to artificially inflate earnings to meet Wall Street expectations. The accounting gimmickry covered up $1.22 billion in losses Worldcom would have otherwise posted for 2001 and this year's first quarter, the SEC said.

A Congressional oversight committee, which has been investigating Enron, Andersen and Global Crossing Ltd. , said it expected to also probe WorldCom -- one of the biggest accounting scandals on record. Other recent scandals include Tyco, ImClone, Xerox and Adelphia.

"My committee has just begun, of course, our investigation into WorldCom. I would expect we'll hold hearings on that," Rep. James Greenwood, chairman of the House Energy and Commerce subcommittee on investigations and oversight, said on CNBC.

The U.S. Justice Department, which has the power to bring criminal charges, said WorldCom was under review.