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CLINTON, Miss. (CBS.MW) -- The WorldCom
board members who failed to detect massive fraud at the phone giant
resigned together on Tuesday, helping new Chief Executive Michael Capellas
solidify his grip on the bankrupt company as it plots its reorganization.
All together, six members, a majority of the board, tendered their resignations. They are Carl J. Aycock, Max E. Bobbitt, Franceso Galesi, Gordon S. Macklin, Bert C. Roberts, Jr. and John W. Sidgmore. Board member Judith Areen resigned last week. On Monday, the bankruptcy court approved a pay package under which Capellas, the former CEO of Compaq and president of Hewlett-Packard, could receive $20 million in three years if the company performs well. "With the courts' approval yesterday of Michael Capellas as WorldCom's new chairman and CEO, it is now appropriate for each of us to stand down as directors and give him the opportunity to continue the process we have started to put in place substantive reforms and best governance practices," board members said in a joint statement. Until Capellas was hired last month, Sidgmore was acting CEO. Roberts, the executive who sold MCI to WorldCom in 1998, had been chairman. Aycock had been a board member since 1983 and was one of the earliest investors in LDDS, the company that later became WorldCom. Bobbitt, a telecom executive who joined the board in 1992, headed the audit committee. Galesi, an entrepeneur, also joined the board in 1992. Macklin came aboard in 1998 and was a former chairman of the high-tech banking firm of Hambrecht & Quist. Areen arrived at the same time as Macklin and is dean of the law center at Georgetown University. In October, another longtime board member, Stiles Kellet Jr., also resigned. He along with former CEO Bernard Ebbers was one of the company's original founders. The only board members who remain are the newly appointed ones -- Nicholas Katzenbach, a former prosecutor; Dennis Beresford, ex-chairman of the Financial Accounting Standards Board; and C.B. Rogers, Jr., former chairman and CEO of Equifax. WorldCom spokesman Julie Moore said she's not sure when the departed members will be replaced. The board had had 11 members. In such circumstances, companies usually empower nominating committees that consist of senior executives, creditors and bankruptcy court representatives to select new board members. In June, WorldCom (WCOEQ) disclosed concealing nearly $4 billion in expenses during part of 2002 and all of 2001 -- a revelation that promptly plunged the No. 2 U.S. long-distance carrier into bankruptcy. The ruse allowed WorldCom to post profits instead of actual losses during that period. Further investigation revealed that former executives started hiding expenses and artificially inflating revenue at least as far back as 1999. So far, more than $9 billion in accounting errors have been discovered. Several senior executives have been arrested, although Bernard Ebbers has not been charged. |