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MCI to Ebbers: Timberrr!

MCI wants the $340M it's owed by Bernie Ebbers – right now! It may all hinge on some Southern backwoods

July 12, 2004

3 Min Read
MCI to Ebbers: Timberrr!

Nortel Networks Ltd. (NYSE/Toronto: NT) may be busy tracking down a few million dollars taken by its disgraced former executives (see Nortel Wants Its Bonuses Back), but MCI Inc. (Nasdaq: WCOEQ, MCWEQ) has got bigger fish to fry in that department: some $408 million, in total.

MCI (the carrier formerly known as WorldCom) is stepping up efforts to recoup the money it's owed by former CEO Bernie Ebbers.

Ebbers, currently on $10 million bail and due in court in November(see Sullivan to Testify Against Ebbers), was due to pay back $408 million he borrowed from the carrier over a five-year period, an agreement reached with MCI when he jumped ship in April 2002.

MCI has recovered about $70 million so far, but it wants the remaining $340 million or so, RIGHT NOW. On Friday, it filed suit in U.S. Bankruptcy Court for the Southern District of New York to get the money back -- and to void Ebbers's prior separation agreement, which gives him a pension worth $1.5 million annually as well as an office and use of the company plane.

Keep in mind, however, that Ebbers was one of the more savvy diversifiers of dotcom shares, which he wisely sold and invested in yachting, timber, and ranches. Turning those assets back into shareholder cash is no easy task.

How's the asset recovery gone so far? The $70 million MCI's gotten from the sale of some of Bernie's assets appears to only scratch the surface of what's there. Below is a handy update on the status of his assets, both past and present, and MCI's efforts to recoup the lost dough.

Here's what MCI's got so far:

  • First there was the luxury boat business. Ebbers liked his yacht so much, he bought the company. He paid $14.4 million in 1999 for yacht-building company Intermarine Savannah and then reportedly invested a further $25 million in the business. As Power and Motoryacht Magazine puts it in a review of Intermarine's flagship yacht, the Intermarine 145, "nothing worthwhile can ever be achieved without taking a risk." Hmmm, yes, that fits Bernie's style.

    Ebbers handed the company, which was leaking more than $100,000 a week, over to WorldCom in late 2002. The carrier offloaded it to another yacht builder, Palmer Johnson Savannah, for $9.8 million in February 2003. After costs, MCI netted about $7 million.

  • Next was the Ebbers weekend retreat in Canada, Douglas Lake Ranch, a modest patch of real estate -- 500,000 acres, or about three times the size of New York City. (Handy for the kids, plenty of room for them to run around.) Ebbers bought that for $73 million, and MCI sold it in May 2003 for "gross proceeds" of $68.5 million.

    So what about the remaining lucre? How will that be recovered? There are a few other Ebbers investments:

  • How about 540,000 acres of timber forest in Louisiana, Mississippi, Alabama, and Tennessee? Ebbers owned 65 percent of Joshua Holdings, which bought the timber land for $600 million in 1999. No word on whether this has been sold or not, as MCI didn't return calls.

  • A saw mill, Columbus Lumber, in Brookhaven, Mississippi. Value and status unknown.

  • Looking for organic growth? Look no further than Pine Ridge Farm, which specializes in herbs, flowers, and workhorses (insert your own joke here...).

  • If you fancy owning a sports team, you already missed your chance to buy one from Bernie. He sold his stake in the Jackson Bandits hockey team in 2002.

    — Ray Le Maistre, International News Editor, Light Reading

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