WorldCom bankruptcy hearing kicks off Monday

A two-week hearing into whether WorldCom can emerge from Chapter 11 bankruptcy starts Monday in the New York courtroom of US Bankruptcy Judge Arthur Gonzalez

A two-week hearing into whether WorldCom can emerge from Chapter 11 bankruptcy starts Monday in the New York courtroom of US Bankruptcy Judge Arthur Gonzalez.

If all goes as expected, Gonzalez could rule by early October on WorldCom's case, according to Alfredo Perez, an outside bankruptcy attorney representing the carrier. Perez spoke during a conference call with reporters this morning.

WorldCom, now operating as MCI, expects to begin presenting its case with opening statements and will then call about 12 witnesses, Perez said. He didn't identify those witnesses but said CEO Michael Capellas isn't expected to testify during the first week of the hearing. He didn't rule out an appearance later by Capellas, though.

The hearing could last as long as three weeks, depending on how long WorldCom's witnesses are questioned by "objectors" — those parties, primarily businesses, that object to WorldCom's plan for recovering from bankruptcy and being confirmed as a reconstituted business.

Despite WorldCom's admissions last year of accounting irregularities totaling $11 billion, the bankruptcy hearing won't delve directly into those issues and is expected to focus instead on what WorldCom's creditors deserve to receive for past debts, Perez said. For example, WorldCom must prove that creditors will receive more money under the Chapter 11 bankruptcy process than they would under the more severe Chapter 7 process.

Also, WorldCom must prove that its consolidation plans are feasible, Perez said.

Many parties have come forward to object to WorldCom's emergence from bankruptcy, which generally means they want more compensation for debts WorldCom owes, Perez said. "In every single bankruptcy case, people always want a little more," he said.

Contrary to news reports, only a small part of the hearing will be devoted to objections by AT&T that WorldCom defrauded it and other customers with a call routing scheme, Perez said. "It's not a hurdle at all," he said. AT&T has leveled those fraud charges in a federal district court in Virginia, as well.

Anastasia Kelly, general counsel for WorldCom, said an internal probe into call routing processes is still under way, and she couldn't offer a date when that investigation will conclude. She reiterated past WorldCom statements that it has in no way compromised national security by routing calls through Canada and that the routing is legal. She said only 8% of WorldCom's traffic travels over connections arranged by third parties.

"We are going to do the right thing," she said about the probe, which is looking into 10 years of call routing behavior.

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