The Regents - University of California | Office of The President

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VI.
WORLDCOM’S STOCK
88. Until its collapse in 2002, WorldCom appeared to the markets to be a
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thriving company. In the late 1990s, analysts thought that the telecommunications
industry had the potential for unlimited growth and investors invested significant
monies into telecom companies. For many years, the telecommunications industry
as a whole did very well.
89. During the 1990s, WorldCom was one of the best performing stocks
in the Standard & Poor’s 500 index. WorldCom’s stock had high of $96.77 per
share on June 30, 1999. Stock analysts touted the stock, none more than defendant
Salomon’s analyst Jack Grubman.
90. Since it appeared to be a thriving company, WorldCom’s executives
were highly compensated. For example, as CEO of WorldCom, Ebbers received
an extremely generous compensation package. From 1999 through 2001, he
received in excess of $77 million in total compensation. According to
WorldCom’s 10-K’s filed with the SEC, Ebbers received the following
compensation:
1999: $36 million total compensation, including $935,000 in salary; $7.5
million in a performance bonus; $60,000 in other compensation; and 1,857,420
stock options worth $27,694,123 on December 31, 1999.
2000: $31.8 million total compensation, including $1 million in salary; $10
million in a retention bonus; $50,000 in other compensation; and 1,238,280 stock
options worth $20,790,721 on December 31, 2000.
2001: $9.1 million total compensation, including $1 million in salary;
$48,000 in other compensation; and 1,238,280 stock options worth $8,058,968 on
December 31, 2001.
During the 1990s, Ebbers borrowed in excess of $1 billion, including loans
from CitiGroup, using his WorldCom stock as collateral. WorldCom guaranteed
the loans and also loaned him over $400 million at below market rates. Ebbers
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COMPLAINT