The Regents - University of California | Office of The President

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IX. ROLE OF ARTHUR ANDERSEN ...............................54
A. Andersen Earned Millions of Dollars in Fees By Providing Audit,
Tax and Consulting Advice to WorldCom for 8 Years ..........54
B. Responsibilities of an Independent Auditor ...................55
C. Andersen Knew Of and Ignored Material Red Flags Regarding
WorldCom’s Fraud ......................................59
D. Andersen Allowed the Fraud to Continue and Made False
Representations About WorldCom’s Financial Statements .......63
E. Andersen Violated Its Professional Obligations ...............64
X. SALOMON HAD AN IMPROPER RELATIONSHIP
WITH WORLDCOM .........................................67
A. Salomon & WorldCom Each Earned Millions of Dollars Because of
their Close Relationship ..................................67
B. Salomon Provided WorldCom Executives With Stock in IPOs and
Favorable Analyst Reports in Exchange for WorldCom’s Investment
Banking Business .......................................68
C. Grubman Was a Partisan Supporter of Salomon’s Investment Banking
Clients, Including WorldCom ..............................70
D. Grubman and Ebbers Had Close Relationship ................72
E. Grubman Touts WorldCom Stock Notwithstanding
His Knowledge of Adverse Information about
WorldCom’s True Financial Condition ......................73
F. Salomon Made Misrepresentations and Omitted
Material Facts to Retain its Lucrative Fees from WorldCom .....80
XI. THE LOANS TO WORLDCOM ................................81
XII. THE PUBLIC OFFERINGS ....................................82
A. Public Offering May 2000 ................................82
B. Public Offering May 2001 ................................83
FIRST CAUSE OF ACTION ........................................84
SECOND CAUSE OF ACTION ......................................86
THIRD CAUSE OF ACTION ........................................87
FOURTH CAUSE OF ACTION ......................................89
PRAYER FOR RELIEF ............................................90
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COMPLAINT