MCI Files Suit to Collect Close to $300M in Funds Loaned to Ebbers
In the heydays leading up to the collapse of WorldCom and other corporate entities, loaning money to top executives was a common practice. MCI Inc., formerly known as WorldCom, filed suit last week to recoup more than $300 million ousted chief executive Bernard J. Ebbers still owes the company.
Ebbers borrowed $408 million from WorldCom after company stock he had pledged as collateral for personal loans lost value, the Wall Street Journal reported. When the stock no longer provided adequate collateral, Ebbers was going to have to sell stock to cover the loans. To keep that from happening and generating bad publicity, the board loaned him money.
Ebbers was ousted in April of 2002 mostly due to the flap over the loans. The company filed for bankruptcy court protection in July 2002 following the exposure of an $11 billion accounting fraud.
The company now known as MCI and Ebbers have so far sold assets worth about $70 million, which was put toward the debt, according to the complaint filed last week in U.S. Bankruptcy Court for the Southern District of New York.
The effort has been cooperative in nature and the suit was apparently filed to preserve the company’s legal standing in the matter. David Kaufman, Ebbers's attorney, told the Journal that he hopes MCI's action doesn't signal a shift in the cooperative tone that has prevailed thus far.
"Thus far, the parties have worked together very cooperatively and Mr. Ebbers will continue to cooperate," said Kaufman, who is based in Jackson, MS. He said any assertion that Ebbers is in arrears is incorrect. "Mr. Ebbers is current on his note to the company and the next payment is not due until next year."
Voice of the Editor
Which isn’t completely true. I mean, occasionally I drop by when I manage to sneak out of the nonstop frat party over at Going Concern, but I’m mostly a wallflower over there. I’m happy to say that I’ve been given express permission (or explicit orders, if you like) to wander over here to AccountingWEB more often.
Why is that, you might ask? My job is to replace the irreplaceable Gail Perry as Editor-in-Chief. What does that mean? I don’t really know! I think it’ll be fun getting a feel for things, throwing in my own thoughts here and there, and listening to the discussions you’re having about the accounting profession.