By Noah Grand
DAILY BRUIN REPORTER
[email protected]
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Allegations of dishonest business practices in corporate America
have once again hurt the UC to the tune of hundreds of millions of
dollars. The UC estimates it lost $352.5 million in WorldCom stock
after the company revealed faulty accounting practices earlier this
week. Though the losses are even bigger than the UC’s Enron
stock losses, they are less than 1 percent of the value in the UC
Retirement Plan portfolio. “The WorldCom losses do not affect
the university’s ability to provide beneficiaries with
retirement benefits,” a statement from the UC said. On
Tuesday, June 25, WorldCom revealed that internal auditors found
that the company had hidden $3.8 billion in expenses as long-term
investments. That means WorldCom ““ the nation’s
second-largest long-distance company ““ may have lost millions
of dollars while reporting it made a profit. WorldCom CEO John
Sidgmore responded in a public letter, saying WorldCom management
is “surprised and outraged” over what happened.
“I am proud that our own people discovered these
irregularities and had the courage and professionalism to act
quickly,” Sidgmore said in the letter. Sidgmore also pledged
to work with Bush and the appropriate federal agencies to
investigate possible fraud, “and to set an example by
accepting responsibility and taking decisive action.” After
repeated phone calls, WorldCom could not be reached for further
comment. The UC’s losses are only estimates, said UC
spokesman Trey Davis, because the university has not sold all of
its WorldCom stock: it still owns 14.6 million shares.
“I’m not sure whether we’re in the process of
selling those shares,” Davis said. The university has sold
some of its stock, but Davis would not say when the stock was sold
or how much was sold. He did say that the UC lost $10.9 million on
the stock it already sold, but that is only 3 percent of the total
estimated loss.
Enron again? This is not the first time that the UC’s
pension plan has been a victim in corporate accounting scandals.
After Enron started heading toward bankruptcy in November, the UC
sold all its stock in the company, worth about $145 million. In
that case, the UC joined a class action lawsuit against top Enron
Corp. members and their auditor Arthur Anderson a month later,
accusing them of fraud. However, the UC has not decided whether to
sue WorldCom. Any decision about whether to sue WorldCom would be
made by the UC Board of Regents, Davis said. The university’s
general counsel ““ the legal arm of the UC ““ will gather
information for the board to help it make its decision. Davis said
there is no timetable for when the board would decide whether or
not to sue. “There isn’t a particular fact somebody is
waiting for in order to make a decision,” Davis said.
“We have to gather information to see how the matter is
developing.” The board is currently directing the suit
against Enron because the UC was named lead plaintiff. Other public
pension plans throughout the nation are in positions similar to the
UC’s. The California Public Employees’ Retirement
System estimates $600 million in losses on WorldCom stocks and
bonds. They have yet to decide whether or not to sue, according to
Pat Macht, an agency spokesperson, but a decision could be made in
a few weeks. The agency joined the suit against Enron when it had
only lost $40 million. CALPERS has not sold any of its stock in
WorldCom. Macht said the agency is currently evaluating when to
sell the stock. With reports from the Associated Press.