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By Noah Grand

DAILY BRUIN REPORTER

ngrand@media.ucla.edu

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.