The Regents - University of California | Office of The President

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
36. Defendant Salomon played a critical role in completing the merger.
Salomon was one of the key advisors in the deal and earned $32 million in fees,
according to Thomson Financial. As set out in more detail, infra, Salomon’s
Grubman issued many reports touting the stock and the merger. Salomon saw the
deal as trendsetting. Philip Keevil, managing director of Salomon in London, in
the April 1998 issue of Corporate Finance commented about the merger:
“WorldCom stole MCI from under the nose of British Telecom. It was
trendsetting because it was a hostile equity transaction funded by a company
whose equity was very highly valued. Many more people are looking at hostile
equity transactions as a result of that.”
37. Defendant Andersen played a critical role in providing accounting,
tax and consulting advice to WorldCom about the merger.
38. Andersen’s role was more than one of a financial advisor. It also
touted WorldCom to the public. For example, in April of 1998, Andersen’s
Global Communications & Entertainment Group suggested that WorldCom’s next
merger could be with Nextel because it could give WorldCom a nationwide
wireless network. The Atlanta Journal and Constitution, April 8, 1998.
39. Without the significant assistance of Salomon and Andersen in
advising about the merger and their representations which kept WorldCom’s stock
price high enough to pay for the merger, the merger could not have happened.
40. In reliance on Defendants’ representations, Plaintiff purchased
WorldCom stock during the period February through May, 1998 and in November
of 1998.
41. Unbeknownst to the public, until 2002, WorldCom needed the
revenue from this merger to meet analyst’s expectations and Salomon needed the
merger to avoid huge losses. Both would have been forced to incur huge losses if
the merger had not occurred. The MCI-WorldCom merger was a key part of
10
COMPLAINT