Citigroup and Smith Barney defrauded shareholders of WorldCom, which now calls itself MCI, and should repay all their losses, attorney David Ennis told former workers for the merged companies at a meeting in Tampa.
“If you owned WorldCom stock in a Smith Barney account, you were defrauded,” Ennis said. “We’re here today to try to get your money back.”
WorldCom, the No. 2 U.S. long-distance telephone and data services company, filed for bankruptcy in July 2002, one month after its $11 billion accounting scandal broke. Its stock lost almost all of its value.
WorldCom’s reorganization plan calls for bondholders to recover about 36 percent of what they are owed. Shareholders would get nothing. Citigroup, the world’s largest financial services company, in April was one of 10 banks to settle regulator charges that they issued biased research to win investment banking business.
Ennis said Smith Barney and its telecommunications equities analyst Jack Grubman published false and misleading reports urging the purchase of WorldCom stock. He said Citigroup, which owns Smith Barney, loaned WorldCom’s then-Chief Executive Bernard Ebbers $1 billion, which created a conflict of interest with its customers that the company never disclosed.
Ennis said his firm, Ennis, Paige and Epstein, and three other Florida firms were preparing to file arbitration claims against Citigroup and Smith Barney with the National Association of Securities Dealers on behalf of customers who lost money on WorldCom stock.
Asked if he felt defrauded, former employee Robert Pitschke replied, “Absolutely. Someone should get the electric chair for this.”