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Defendants’ scheme to defraud and to maintain the illusion that WorldCom was a
thriving company.
D. 1999: The Proposed Sprint Merger
42. In 1999, WorldCom announced an agreement to merge with
telecommunications giant Sprint (the two companies approved the merger
agreement on October 5, 1999). Andersen provided accounting, tax and
consulting advice to WorldCom about the Sprint merger. Salomon acted as
financial advisor to WorldCom in connection with the Sprint merger and received
millions of dollars in fees. It stood to gain even more if the deal had been
approved. The merger was touted by Grubman at Salomon.
43. From December 1999 through February 2000, Plaintiff purchased
WorldCom stock in reliance on the statements by Defendants concerning the
WorldCom/Sprint merger. The merger was stopped by the Department of Justice
because of antitrust concerns.
44. Unbeknownst to the public, until 2002, WorldCom was depending on
this merger to provide it with much needed revenue. The failure of the merger to
go through posed significant problems for WorldCom and it needed to find
another source of revenue to continue its scheme to defraud.
E. 2001: Intermedia/Digex Merger
45. In 2001, WorldCom acquired Intermedia Communications, Inc.
including an interest in Digex, Inc., a leading provider of managed Web and
application host services. The reported purchase price was $5.8 billion in stock
and WorldCom assumed debt obligations of $2.4 billion
46. By 2000, as a result of engaging in each of these acquisitions,
WorldCom was the second largest long-distance telephone service carrier in the
world. According to the First Interim Report of Dick Thornburgh, Bankruptcy
Court Examiner of November 4, 2002, page 6:
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COMPLAINT