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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IV.<br />
BACKGROUND OF WORLDCOM<br />
A. <strong>The</strong> Early Years<br />
27. In 1983, Murray Waldron and William Rector started a long distance<br />
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reseller company called LDDS-Long Distance Discount Service (“LDDS”).<br />
28. In 1983, Bernie Ebbers (“Ebbers”), an early investor and former bar<br />
bouncer, and three others bought LDDS. In 1985, Ebbers became CEO and he<br />
remained in that position until he resigned in April <strong>of</strong> 2002. Ebbers was a handson<br />
manager who emphasized motivating employees to meet sales goals. In an<br />
August 28, 1996 USA Today article, he was referred to as “irascible, garrulous and<br />
charismatic.” In an August 31, 1996 USA Today article, Jack Grubman, defendant<br />
Salomon’s key telecommunications analyst, gave his opinion on Ebbers:<br />
“He’s organically very smart. He’s very shrewd,” says<br />
Jack Grubman, an analyst at Solomon Bros. who advises<br />
Ebbers. “He does not believe in management by<br />
committee. He trusts his instincts and then has the guts<br />
to act on them. Anyone in this industry who dismisses<br />
Bernie Ebbers will find him eating their lunch.”<br />
29. LDDS changed its name to WorldCom in 1995 (and hereinafter the<br />
company will be referred to as WorldCom).<br />
B. WorldCom Goes Public and Engages in a Strategy <strong>of</strong> Growth<br />
Through Acquisition or Merger<br />
30. In August <strong>of</strong> 1989, WorldCom went public through its acquisition <strong>of</strong><br />
Advantage Companies, Inc., a long distance reseller. <strong>The</strong>re was no exchange <strong>of</strong><br />
cash in the deal; the deal occurred through a stock conversion.<br />
31. After the Advantage acquisition, WorldCom then embarked on a<br />
series <strong>of</strong> over 60 mergers and acquisitions over the next 12 years.<br />
32. From 1990 to 1995, WorldCom experienced enormous growth. It<br />
went from being a long distance telephone company serving Mississippi to serving<br />
27 states in the Southeast, Southwest and Midwest by the end <strong>of</strong> 1992. It<br />
continued to expand through acquisitions, and by 1995, it was an international<br />
company with reported revenues <strong>of</strong> about $3.9 billion (and long-term debt and<br />
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COMPLAINT
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