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WorldCom: See Ya, Sidgmore

After less than five months at the helm of one of the most scandal-ridden companies in history, John Sidgmore will relinquish his position as WorldCom Inc.'s (OTC: WCOEQ) CEO as soon as a replacement for him is found, the company said yesterday (see WorldCom to Replace Sidgmore).

"I have concluded that having moved WorldCom through the initial phase of the bankruptcy process now is the appropriate time for the company to initiate a search for a long-term CEO," Sidgmore said in yesterday’s release, insisting that he had always intended his appointment as CEO of WorldCom to be a temporary solution after former CEO Bernard Ebbers was ousted from the company in April.

There is, however, reason to question whether that’s the real reason for his quick retreat. A Washington Post report last month indicated that two of the company’s board members, Max E. Bobbitt and Stiles A. Kellett Jr., were pressuring the board to fire Sidgmore, and rumors have been circulating among analysts for weeks that he might be among several high-level executives let go.

Several industry observers say they think Sidgmore is being edged out because his being there when the company cooked the books to the tune of $7.68 billion has created a perception of guilt (see WorldCom Finger-Pointing Begins ). He may not have known about the fraudulent accounting practices, but the mere suspicion that he might have is stopping WorldCom from getting on the road to recovery, some say. “He could easily not have known,” says Jeff Kagan, an independent analyst based in Georgia. “But he’s part of the old guard. It’s a perception problem.”

“Even if he didn’t know,” agrees Network Conceptions LLC analyst Phil Jacobsen, “in this environment it smacks of lying and deceit.”

Then there's the political aspect (see Bush Outraged by WorldCom Fraud): “The government needs to get this thing cleaned up,” Jacobsen says. “I bet there was a lot of political pressure.”

Frank Dzubeck, president of Washington, D.C., consultancy Communications Network Architects [no website], has his own theory. “The bankers didn’t want to go with Sidgmore,” he says. “They thought he wouldn’t let go of the assets that are valuable to the company… The bankers want money… It’s obvious that people want their pound of flesh.”

WorldCom could not be reached for comment.

No matter whether Sidgmore is being pushed out or has decided to step down, he won’t be going far. Once a successor is found, he will return to his former role as vice chairman of the company, according to the release. Bert Roberts will continue in his position as chairman of the board.

"By returning to my vice chairman role, after the search is complete, I, along with Bert Roberts will be able to remain active in a strategic capacity while our new CEO manages the day-to-day operations of the company and the overall bankruptcy process," he said in the statement.

But while Sidgmore’s future looks cookie-cut, it's far from certain who his replacement will be. “Who is there that can genuinely do the job, and who is clean enough [to get it done] in this environment?” Jacobsen asks.

The only person who has enough credibility internally to get the job done, he says, is Wayne Huyard, the COO of MCI. “Internally, at least, he could pull it off,” he says. “Still, he’s been there throughout…”

Rather than hire a WorldCom veteran, it’s more likely the company will look outside the company for someone untainted by the ongoing scandal. As a matter of fact, "outside the company" might not even be far enough to go to find a tarnish-free candidate. CNA's Dzubeck expects the company to bring in a CFO-type from outside the industry altogether, basically to "disembowel" the company.

On a less pessimistic note, Kagan says he expects plenty of executives to be willing to take the job. “It’s a no-lose situation,” he says, pointing out that if the new management can’t turn around the company, no one could blame them, and if they do manage to pull it up out of the ashes, they’ll go down in history. “I’d love to see a woman in there,” he says. “But I doubt it.”

Sidgmore and Roberts, along with other members of the board and the official committee of unsecured creditors, will conduct the search for the new CEO, according to yesterday’s release. WorldCom will also hire a recruiting firm to assist in the search for a new president and CEO.

In the same release, WorldCom announced that it expects to reemerge from bankruptcy in mid-2003, and that the transition to a new management will not impact the company’s employees or customers. Ending on a note of fairytale optimism, the release stated that “The executive search will be swift and should help WorldCom emerge more quickly from Chapter 11 as a healthy, viable entity.” And they lived happily ever after…

Far from a fairy tale, Dzubeck sees the ousting of Sidgmore as the beginning of the end. “This is the kind of action that will perpetuate a slow death-spiral,” he says. “Instead of salvation, the end result will be… disembowelment.”

But the WorldCom saga doesn’t end there. News reports yesterday stated that WorldCom's board has also been considering whether to retract the whopping $1.5 million a year for life severance package Bernie Ebbers received when he left the company, as well as a controversial $408 million loan it issued to the former executive while he was still in office. No action has reportedly been taken.

“The $1.5 million for life is completely ridiculous… It makes perfect sense to take that away from him,” Jacobsen says. “Is it legal? I guess he can fight it out in his jail cell.”

Not only is it not legal, it’s not possible for the board to take away Ebbers’s severance without the bankruptcy judge’s consent, Dzubeck says. “The board has no more rights because it’s in bankruptcy,” he says. However, since the severance package was granted within six months of the bankruptcy, he says, the judge could opt to cap it just as he did with all the other former WorldCom employees. “This is so up to the judge,” he says, pointing out that the judge also has the power to ask for the immediate repayment of the loan.

In yesterday’s release, WorldCom also announced that it elected C.B. Rogers, Jr., former CEO of Equifax, to its board on August 29, 2002.

— Eugénie Larson, Reporter, Light Reading
www.lightreading.com
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67GT500 12/4/2012 | 9:47:22 PM
re: WorldCom: See Ya, Sidgmore When does Bert Roberts head roll???

He should have been the one on the board that protected the integrity of the company. Maybe I'm asking too much, but it boggles my mind that he watched this happen.
Belzebutt 12/4/2012 | 9:47:21 PM
re: WorldCom: See Ya, Sidgmore How legal would it be to cap Roth's or McGinn's ridiculous pension plans? Assuming their buddies on the boards would actually want to do it, what chance would a company have in court to reduce their pensions? Would the legal cost offset the savings?
wilecoyote 12/4/2012 | 9:47:19 PM
re: WorldCom: See Ya, Sidgmore Can these idiots, these monumental freaking idiots, mcginn, roth, ebbers, et al receive pension money while in prison, where they belong?

Every time I think about how many lives these guys have wrecked with their incompetence and dishonesty it makes my blood boil.

F_ck them. They should be paying back their companies the money they extracted, with interest. How can they sleep taking money from companies they wrecked? $1.5 M a year pays for what, 10-15 people still employed every year? A drop in the bucket but a start. Bastards.

You gotta love Chambers taking $1 a year. Comparing Chambers to Roth and McGinn is a laugher. Those guys must have serious inferiority complexes.
DarkWriting 12/4/2012 | 9:47:15 PM
re: WorldCom: See Ya, Sidgmore Roth ($Ms) - Da Nort
McGinn ($M) - Joisey
Ebbers ($M) - Misery
Chambers ($1 salary) - Bay Area

WTF, Willy. I don't live in the bay area and I certainly don't agree with TheChief often but, like he says, you need to lighten up on the race card and bay area thing. Most of the rest of your comments are right on. (The Aooogah alerts are a little annoying, however.)

DW
willywilson 12/4/2012 | 9:47:12 PM
re: WorldCom: See Ya, Sidgmore WTF, Willy. I don't live in the bay area and I certainly don't agree with TheChief often but, like he says, you need to lighten up on the race card and bay area thing. Most of the rest of your comments are right on. (The Aooogah alerts are a little annoying, however.)

----------

Oh for God's sake. I bet you were doing the New Economy dance three years ago.
DarkWriting 12/4/2012 | 9:47:09 PM
re: WorldCom: See Ya, Sidgmore >>>Oh for God's sake. I bet you were doing the New Economy dance three years ago.<<<

Not hardly, my bumper sticker says:

I survived Reaganomics, or did I?

DW
DarkWriting 12/4/2012 | 9:47:09 PM
re: WorldCom: See Ya, Sidgmore >>>Oh for God's sake. I bet you were doing the New Economy dance three years ago.<<<

Not hardly, my bumper sticker says:

I survived Reaganomics, or did I?

DW
willywilson 12/4/2012 | 9:47:08 PM
re: WorldCom: See Ya, Sidgmore Not hardly, my bumper sticker says:

I survived Reaganomics, or did I?

-------

Really interesting. You're a liberal and the other guy, "The Chief," is recommending that I read books by Sowell, the right-winger from the Hoover Institution. And why? Because in passing, to illustrate a point, I made a comparison between black welfare mothers and white telecom engineers.

And now we've got each of you telling me I'm engaging in racial hatred.

Now if that's not evidence that the United States is gonzo psychotic on the subject of race, I don't know what is. Not to mention group-think and Freudian hoohah. Better not shout Negro in a crowded theater; you be stampeded by all the white people calling you a racist ...
BobbyMax 12/4/2012 | 9:46:58 PM
re: WorldCom: See Ya, Sidgmore There is no doubt that the WorldCom Management and its Board acted improperly. The Board never took any action toprotect the interests of the shareholders.

What I find very strange is that the Local, State and Federal Government put poor people in jail for petty thefts and very minor offenses. But when it comes to taking any action against the rich the corrupt people, the US Government for the last 57 years have not taken any action. The Government has seized the assets of Mr. Webber.

There is no mechanism through which the shareholders of any company can take action aginst the company in which they hold shares. In fact, the US Government has made illegal to do so.

The cases we have heard so far just reprents .000000000005% of percentage cases of the corruption that takes place in the companies within our borders.
AAL5 12/4/2012 | 9:46:57 PM
re: WorldCom: See Ya, Sidgmore Bobbymax,

".000000000005%" of corruption has been exposed?

And you get this figure from which source exactly?

Ah yes, your source for this information is "Harvey Mudd day-dream-land". It only has one occupant, a sour depressed individual that likes to get on his soapbox and talk the biggest load of unsubstantiated nonsense that everyone does not wish to hear.

Although you have found a relatively safe place to emote your negative, non-factual garbage as who is going to voice an opinion against you and stand up for Worldcom?

Tell me when you get your newspapers do you open the business pages and the first thing that you do is look for news of companies going bankrupt? Do laugh and giggle with joy when you see another executive has been put behind bars for inside trading, and bellow with all your might GǣI told you so, the whole world is corrupt and evilGǥ.

You just donGt get it though, you will just pass this off as another Gǣhate emailGǥ, I donGt hate you Bobby, I feel extremely sad and sorry for you as you must be so dreadfully unhappy with your own life to keep on urinating on everyone elseGs parade.

AAL5
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