The Regents - University of California | Office of The President
The Regents - University of California | Office of The President
The Regents - University of California | Office of The President
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<strong>The</strong> <strong>Regents</strong> <strong>of</strong> the <strong>University</strong> <strong>of</strong> <strong>California</strong> (“<strong>The</strong> <strong>Regents</strong>”), as and for its<br />
complaint, alleges as follows upon information and belief based, inter alia, upon<br />
investigation conducted by Plaintiff and its counsel, except as to those allegations<br />
pertaining to Plaintiff personally, which are alleged upon knowledge:<br />
I. OVERVIEW OF COMPLAINT<br />
1. This action involves one <strong>of</strong> the largest financial frauds in history. For<br />
years, the Defendants sued herein represented that WorldCom, Inc.<br />
(“WorldCom”), a global communications company, was a thriving and growing<br />
company. In reliance <strong>of</strong> these representations, Plaintiff was induced to purchase<br />
WorldCom stock.<br />
2. Since 1994, WorldCom had been a house <strong>of</strong> cards waiting to collapse.<br />
It had financed its growth through a series <strong>of</strong> mergers and acquisitions which<br />
allowed it to manipulate its financial statements and inflate revenues. Rather than<br />
having true growth, WorldCom only appeared to be successful because <strong>of</strong> the<br />
Defendants’ scheme to defraud. With the assistance <strong>of</strong> Defendants, WorldCom<br />
accomplished this scheme by overvaluing assets, including goodwill, improperly<br />
recording extraordinary charges, shifting revenues from the quarter before a<br />
merger occurred to the quarter after the merger had been completed, engaging in<br />
sham barter transactions, booking the same sales twice, improperly capitalizing<br />
certain expenses, including line costs, and engaging in other accounting<br />
irregularities. As a result <strong>of</strong> this scheme to defraud, WorldCom’s financial<br />
statements for these periods were false.<br />
3. On June 25, 2002, WorldCom announced that it intended to restate<br />
its financial statements for 2001 and the first quarter <strong>of</strong> 2002 because it had<br />
improperly capitalized expenses <strong>of</strong> $3.055 billion in 2001 and $797 million in first<br />
quarter 2002 for a total write-down <strong>of</strong> over $3.8 billion. <strong>The</strong>se improprieties<br />
resulted in an overstatement <strong>of</strong> WorldCom’s earnings and meant that for these<br />
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COMPLAINT
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