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NEW YORK - WorldCom's plans to emerge seamlessly from bankruptcy as MCI
appear on hold today as allegations of possibly criminal wrongdoing will be leveled
against the company to a U.S. bankruptcy court, the U.S. General Services Administration
(GSA) and federal prosecutors in New York. The charges involve the rerouting of telephone
calls through Canada as a means to avoid tariffs owed to other telecom companies for use
of their networks.
The practice is said to have been ongoing for ten years, but the charges only surfaced in
the last ten weeks when a former MCI employee alerted the FBI about a company project
known as "Canadian Gateway," according to various reports starting with one in The
New York Times over the weekend. Now MCI's rivals, already indignant about the
company's ability to shed debt in the bankruptcy process, have a club to use against the
company. Many have charged, even before the call-shifting allegations became public, that
bankruptcy gave MCI an unfair advantage and that it should be liquidated rather than
revived.
Rerouting calls through Canada allegedly allowed MCI, a unit of WorldCom (otc: WCOEQ - news - people ),
to send them back into the U.S. on AT&T's (nyse: T - news - people )
network, which would mean that AT&T would pay carrying charges that should have been
paid by MCI. Related schemes were said to have laid charges off on Verizon
Communications (nyse: VZ - news - people ).
Some of the rerouted calls may have originated in the State Department and other federal
agencies, adding a potential national security concern to the mix--if sending calls north
of the border made them somehow more susceptible to electronic eavesdropping.
Now Verizon plans to urge the federal government to stop doing business with MCI,
according to The Washington Post. Verizon, along with AT&T, has been asking the
GSA to stop doing business with WorldCom, whose single largest customer is the federal
government. It could receive as much as $800 million for phone services from federal
agencies this year, the Post said. At least seven government agencies, including
the National Transportation Safety Board and the U.S. Postal Service as well as the State
Department, were among the customers.
AT&T, meanwhile, will present evidence of the fraud to the federal bankruptcy court
that appeared poised to clear WorldCom (to be known as MCI) from the final stages of the
reorganization process. The court's acceptance of WorldCom's plan of reorganization was
premised on its finding that the company had purged itself of the massive $9
billion-to-$11 billion accounting fraud that tarred its recent past.
AT&T claims it paid hundreds of millions of dollars in fees that WorldCom should have
paid because calls routed through Canada were made to look like they were placed by
AT&T customers, the Post reported.
MCI said in a statement that "access charges between local and long-distance carriers
have existed for decades and are routine in the industry. As always, we take all inquiries
by the U.S. attorney's office very seriously and will cooperate fully with any
investigation." All phone companies must make use of the networks of other phone
companies so that any phone can ring any other phone. Hashing out who used what is an
important part of the business.
The Post's report, citing unnamed sources, indicates that more than 90 people were
involved in the Canadian scheme, said to be the result of extreme pressure on WorldCom
employees to reduce the access charges. This is a far larger number of employees than is
said to have been involved in the accounting scandal.
But the call-rerouting allegations say that MCI had been engaged in the practices for far
longer than the period of the accounting fraud. There is no indication of why the charges
are just being brought to light now.
Blue-Chip Companies Send More Jobs to India
Provided By Pinnacor, 08.05.03, 10:58 AM ET
A decade ago, a wag famously warned of the giant sucking sound from Mexico, which
threatened to steal America's working-class jobs.
Today, the giant sucking sound comes from a different spot on the globe, and it menaces a
different type of worker. India increasingly is landing high-skilled, highly paid
positions for engineers, accountants and financial analysts formerly employed in the
United States.
West Palm Beach-based Ocwen Financial Corp. offers a case study in how companies
are cashing in on India's allure. Seeking to cut labor costs, Ocwen quietly has hired
hundreds of workers during the past two years in India, where skilled workers are
plentiful and wages are low.
Ocwen, which once had nearly 1,000 employees at its Palm Beach Lakes Boulevard
headquarters, now employs more workers in Bangalore than in West Palm Beach. At the end of
last year, Ocwen had 843 employees in two locations in India, compared with 474 in West
Palm Beach and 534 in Orlando.
The reason, of course, is money. Like many U.S. companies, Ocwen has discovered
well-educated, English-speaking workers come cheaper in India than in the United States.
"We established operations in India to take advantage of a highly skilled but
relatively inexpensive labor force," said Mark Zeidman, Ocwen's chief
financial officer.
These are not sweatshop jobs. Most of Ocwen's Indian employees are college graduates; they
include 80 software developers, along with workers in residential loan servicing, human
resources, accounting and risk management.
Zeidman is quick to point out that Ocwen (nyse: