cø DOC916.4„,_u2 CV C?4.

•

.

in .- ospGrco.

UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF NEW YORK

THE ALBERT FADEM TRUST and BRUCE A. XFADEM, as Trustee, on behalf of themselves and all

•others similarly situated, : 02 Civ.: CLASS ACTION

Plaintiffs, : COMPLAINT

against

WORLDCOM, INC., r-3BERNARD J. EBBERS, •JAMES C. ALLEN, MAX E. JURY TRIAL DEMANWD BOBBITT, FRANCESCO V.:.GALESI, and ARTHUR • c-,ANDERSEN, LLP

Defendants.

...-- — X

Plaintiffs, by their undersigned attorneys, individually and on behalf of the Class described

below, upon information and belief, based upon, inter alia, the investigation of counsel, which

includes, among other things, a review of public announcements made by defendants, Securities and

Exchange Commission ("SEC") filings made by defendants, press releases, reports of securities

analysts, and media reports, except as to the paragraph applicable to the named plaintiffs which is

• alleged upon personal knowledge, bring this complaint (the "Complaint") against defendants named

herein, and allege as follows:

SUMMARY OF ALLEGATIONS

1. This is a securities class action alleging violations of the federal securities laws in

connection with the preparation and dissemination of false and misleading financial statements for

WorldCom, Inc. ("WorldCom" or the "Company") by the defendants named herein. In particular,

during the class period hereinafter defined, defendants made misrepresentations and/or omissions

of material fact, including:

• Misstating Wor/c1Com's earnings in its public filings with the SEC and elsewhere as

a result of failing to record write-downs of goodwill and other intangible assets

associated with WorldCom's acquisition of numerous telecommunications

companies at premium prices including, among others, IvrIS Communications, Inc.,

Brooks Fiber Properties, ANS Communications Network, Compuserve Corp., MCI

Communications Corp., Ozemail Ltd., Equifax Inc., Prime One Tele-TV, Active

Net Inc., CAI Wireless Systems Inc., Skytel Communications Inc., Wireless One Inc.,

UU Net SA Ltd., and Interrnedia Communications, Inc., long after it had become

2

apparent that such assets were being carried at values vastly higher than their true :#•

values;

• Affirmatively misstating the value of goodwill and other intangible assets associated

with WorldCorn's acquisition of numerous other telecommunications companies at

premium prices and carrying such assets on WorldCom's balance sheet at the cost of t,

acquiring them long after it had become apparent that WorldCom had overpaid to

acquire such assets; and,

• Failing to disclose that WorldCom's goodwill and other intangible assets associated

with WorldCom's acquisitions ofnumerous telecommucations companies at premium

prices were being carried at unrealistically and misleadingly high values on

WorldCom's balance sheet.

2. Defendant Arthur Andersen, LLP ("Andersen") violated the federal securities laws by

certifying WorldCom's financial statements as incorporated in WorldCom's Annual Report for the

2

_

-

. -

year 2000 filed with the SEC on March 30, 2001, and by allowing its unqualified opinion to be

incorporated by reference into, inter alia. WorldCom's quarterly filings with the SEC after it was

readily apparent that the goodwill and other intangible assets on WorldCom's balance sheet were

being carried at unrealistically and misleadingly high values.

3. When WorldCorn shocked Wall Street and the world by revealing that it would have

to take a mammoth write-down of goodwill and intangible assets — as much as $20 billion- and the

truth regarding the foregoing misstatements and omissions gradually became known to the market,

WorldCom's share price plummeted to close at $2.35 per share on April 29, 2002.

JURISDICTION

4. This Court has jurisdiction over the subject matter of this action pursuant to § 27 of

the Securities Exchange Act of 1934 (the "Exchange Act") (15 U.S.C. § 78aa) and 28 'US .0 § 1331.

5. Plaintiff brings this action pursuant to Section 10(b) of the Exchange Act as amended

(15 U.S.0 § (b) and 78t(a)) and Rule I Oh-5 promulgated thereunder (17 C.F.R. § 240.10b-5), and

the cormnon law. Venue is proper in this District because defendants conduct business in this

District, defendant Andersen maintains an office in this District, WorlelCom's stock is listed on the

Nasdaq National Market, and many of the wrongful acts alleged herein took place or originated in

this District.

6. In connection with the acts alleged in this Complaint, defendants, directly or

indirectly, used the means and instrumentalities of interstate commerce, including, but not limited

to, the mails, interstate telephone communications and the facilities of the national securities

markets.

3

.•. _ . .

PARTIES

7. Plaintiffs The Albert Fadem Trust and Bruce A. Fadem ("Plaintiffs") purchased

shares of WorldCom at an artificially inflated price as set forth on Schedule "A" hereto and were

damaged thereby.1

8. Defendant WorldCorn, a provider of telecommunications services, is a Georgia

corporation having its principal place of business at 500 Clinton Center Drive, Clinton, MS. The

Company's stock trades in an efficient market on the Nasdaq National Market System under the

symbol "WCOM".

9. Defendant Andersen is a firm of certified public accountants that maintains an office

in the Southern District of New York. Andersen audited WorldCom's materially false and

misleading financial statements during the Class Period, issued materially false and misleading

opinions with respect to such financial statements, and permitted WorldCom to make use of its

unqualified opinion with respect to WorIdCom's financial condition in reports filed with the SEC

and otherwise. As such, Andersen participated in the fraudulent course of conduct as alleged herein

and materially contributed to class members' losses.

10. Defendant Bernard J. Ebbers ("Ebbers") served at all relevant times as WorldCom's

.1President and Chief Executive Officer. r!

11. Defendants James C. Allen, Max E. Bobbitt, and Francesco GalesiFP

served at relevant times as members of WorldCom's board and served on the audit committee of

such board. Defendants Allen, Bobbitt and Galesi are referred to collectively as the"Individual

D efend ant s".

4

CLASS ACTION ALLEGATIONS

12. Plaintiffs bring this action as a class action pursuant to Rule 23(a) and (b)(3) of the

Federal Rules of Civil Procedure on behalf of a class consisting of all persons who purchased,

converted, el<chaxiged or otherwise acquired the common stock of WorldCom between January 3,

2000 and April 29, 2002, inclusive (the "Class Period") and were damaged thereby (the "Class").

13. Members of the Class are so numerous that joinder of all members is impracticable.

Specifically:

a. There were 2_96 billion shares of WorldCom stock issued and outstanding at

times relevant hereto; and

b. While the exact number of Class members is unknown to Plaintiffs at this

time and can only be ascertained through appropriate discovery, Plaintiffs believe that there are

thousands of Class members who acquired WorldCom stock during the Class Period.

14. Plaintiffs' claims are typical of the claims of the other members of the Class.

Plaintiffs and the other members of the Class have sustained damages because of Defendants'

unlawful activities alleged herein. Plaintiffs have retained counsel competent and experienced in

class and securities litigation and intend to prosecute this action vigorously. The interests of the

Class will be fairly and adequately protected by Plaintiffs. Plaintiffs have no interests which are

contrary to or in conflict with those of the Class that .Plaintiffs seek to represent.

15. A class action is supeiior to all other available methods for the fair and efficient

adjudication of this controversy. Plaintiffs know of no difficulty to be encountered in the

management ofof this action that would preclude its maintenance as a class action.

16. Common questions of law and fact exist as to all members of the Class and

5

-

predominate over any questions solely affecting individual members of the Class. Among the

questions of law and fact common to the Class are:

a. whether the federal securities laws were violated by Defendants' acts as

alleged herein;

b. whether Defendants misstated and/or omitted to state material facts in their

public statements and filings with the SEC;

c. whetlier Defendants participated directly or indirectly in the course of conduct

complained of herein; and

d. whether the members of the Class have sustained damages as a result of

defendants' conduct and the proper measure of such damages.

DEFENDANTS FRAUDULENT COURSE OF CONDUCT

A. Dissemination of False and Misleading Financial Information

17. On March 30, 2001, WorldCom issued its annual report for the fiscal year ending

December 31, 2000. Such report included a report to the shareholders of WorldCom prepared and

signed by Andersen dated March 30, 2001 which stated that the financial statements incorporated

in such report "present fairly, in all material respects, the financial position of WorldCom, Inc..."

(2000 10K p. F-2) Such report also included the consent of Andersen to inter alia the incorporation

of WorldCom's audited financial statements that were certified by Andersen into such report (2000

10K Exhibit 23.1) Such audited financial statements stated that World Com had had net income of

over $4 billion (on sales of over $39 billion) for fiscal 2000 and had earned $1.43 per share on

diluted basis. The Company subsequently reported the following financial results:

6

;

• For 1Q01, net income of $610 million and earnings per share of $0.21;

• For 2Q Or, net income of $97 million and earnings per share of $0.04; and,

• For 3Q 01, net income of $536 million and pro forma earnings per share of

$0.16.

Such financial results were submitted to the SEC in quarterly reports on Form 10Q.

Such quarterly reports contained the following statement or a similar statement:

The financial statements included herein, are unaudited and have been prepared inaccordance with accounting principles generally accepted in the United States for interimfinancial reporting and SEC regulation& Certain information and footnote disclosuresnormally included in financial statements prepared in accordance with accounting principlesgenerally accepted in the United States have been condensed or omitted pursuant to suchrules and regulations. In the opinion of our management, the financial statements reflect alladjustments (of a normal and recurring nature) which are necessary to present fairly thefinancial position, results of operations and cash flows for the interim periods_ Thesefinancial statements should be read in conjunction with our Annual Report on Form 10-K/Athe year ended December 31, 2000... (10Q 2Q 2001 at p. 6).

19. These statement was false and misleading as to the financial information reported

in such SEC filings, because the financial information and above-referenced purported financial

results did not include all adjustments necessary to render them a fair and accurate presentation of

WorldCom's financial condition. in fact, such financial results were materially misleading because

they failed to reflect the true value of (or any reasonable approximation of the true value of) the

goodwill and other intangible assets that the Company had obtained in connection with is

acquisitions of numerous other telecommunications companies, including without limitation those

set forth at f.n. 1, supra, at premium prices. Such goodwill and other intangibles continued to be

carried at a value reflecting the price that WorldCom had paid for them at the time of the

7

-------------

acquisitions. even though such value bore no relation to any true market or other realistic value for

such assets.

20. On February 25, 2002 the National Post revealed that, according to research by

consultancy Stern Stewart & Co., WorldCom might have to write off as much as $37 billion in

goodwill and intangibles because they were being carried at values vastly higher than their true

market value.

21. Such unrealistic carrying values led to the adoption of Financial Accounting

Standard 142, which as of January 1, 2002 specifically requires firms to review goodwill and

intangibles for impairment on an annual basis.

22. On March 11, 2002 WorldCom revealed in a press release that it was under

investigation by the SEC and had received a wide-ranging request for documents, including, inter

alia. WorldCom's accounting for companies that it had acquired since January 1, 1991. In the

release the company stated that it believed that "all of its policies, practices, and procedures have

complied, and continue to comply, with all applicable accounting standards and laws." (3/11/02

WorldCom Press Release)

21 On March 13, 2002, WorldCom partially revealed the extent of its accounting

predicament with respect to goodwill and other intangible assets on its balance sheet, revealing in

its Annual Report that it expected to record a $15 to $20 billion impairment as a result of an

ongoing review of its goodwill and other intangible assets.

24. The stock of WorldCorn dropped substantially on this announcement, sliding from

a close of $9.19 on March 8, 2002 to close at $7.37 on March 14, 2002. However, this

announcement was only a misleading partial disclosure of the artificially high carrying value of

8

WorldCom' s goodwill and other intangible assets because WorldCom, with the acquiescence of

Andersen, continued to announce and report its earnings based on the artificially high carrying

values.

25. On March 25, 2002 Business Week reported that the writedowns at WorldCorn

could be far greater than the $15-20 billion estimated by WorldCom because the SEC might force

it to write off a much larger portion of its goodwill. If such write-downs exceed $45 billion, its

debt-to-capital ratio will exceed 68%, leaving WorldCom in violation of its loan covenants and

possibly leading to a cancellation of WorldCom' s $8 billion bank credit line.

26. On April 25, 2002 WorldCom reported its disappointing results for IQ 02. This and

investor concern regarding the looming SEC investigation drove WorldCom stock into a tailspin.

As of April 29, 2002, WorldCom closed at $2.35 per share.

27. On April 30, 2002, WorldCom announced that Defendant Ethers had resigned,

following an 83 percent plunge in WorldCom's stock price in 2002 alone and after the SEC had

commenced an investigation not only into WorldCom's financial practices but into the

circumstances surrounding a $375 million personal loan made to Ebbers by WorldCorn.

B. Wrongful Accounting Practices

28. By reporting earnings based on artificially high carrying values for the Company's

goodwill and intangibles, Defendants violated Regulation S-X (17 C.F.R. § 210.10-01(a) which

requires that annual reports and interim financial statements comply with GAAP and creates a

presumption that financial statements not in compliance with GAAP are misleading and inaccurate.

29. In addition Defendants, with the acquiescence of Andersen, have violated

9

Section 13(b)(2) of the Exchange Act which requires them to "make and keep books, records, and

accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions

of the assets of the issuer..."

30. By failing to periodically review and write down, as appropriate, its goodwill and

intangible assets, the Company, with the acquiescence of Andersen, also breached a duty imposed

by G.AAP as set forth in FASB Statement of Standards No. 121, TT 5 and 6, which requires the

reevaluation of values of assets upon the occurrence of events or changes in circumstances that

indicate that the recoverability of the carrying amount of an asset should be assessed, including:

a. a significant decrease in the market value of an asset;

b. a significant change in the extent or manner in which in asset is used or asignificant physical change in an asset;

c. a significant adverse change in legal factors or in the business climate thatcould affect the value of an asset or an adverse action or assessment by a regulator;and

d. an accumulation of costs significantly in excess of the amount originallyexpected to acquire or construct an asset.

31. Widely publicized problems in the telecommunications industry and in WorldCom's

acquired business should have indicated to management that WorldCom's goodwill and other

intangibles were being carried at values that were materially inflated and not supportable by any

acceptable accounting practices. However, Defendants, with the acquiescence of Andersen, failed

to review periodically the value of WorldCom's goodwill and intangibles and to adjust and write

down the carrying value of same in order to inflate WorldCom's share price by reporting artificially

high and materially misleading earnings.

32. Defendant Andersen deceived the investing public by issuing unqualified audit

10

opinions on WorldCoin's revenues and earnings that Andersen knew or recklessly failed to discover

were false and misleading. Andersen provided unqualified audit opinions relating to the above-

referenced financial statements knowing that its audit opinions would be disseminated to the 1

investing public. Defendant Andersen !mew that such audit opinions were materially misleading

based on the fact that such audit opinions confirmed financial statements that Andersen knew were

materially misleading because they omitted material facts regarding WorldCam's goodwill and

intangibles and stated earnings that were artificially high based on the artificially high carrying

values of such goodwill and intangibles.

STATUTORY SAFE HARBOR

33. The statutory safe harbor provided for forward-looking statements does not apply

here as the false statements alleged herein were not forward-looking.

FRAUD ON THE MARKET

34. Plaintiffs will rely, in part, upon the presumption of reliance established by the fraud-

on-the-market doctrine in that:

a. Defendants named under Claims brought pursuant to the Exchange Act made

public misrepresentations or failed to disclose material facts during the Class Period

regarding WorldCom as alleged herein;

b. The omissions and misrepresentations were material;

c. During the Class Period, WorldCom's common stock was traded on a

developed national stock exchange, namely the NASDAQ National Market, which

is an open and efficient market;

d. WorldCom filed periodic reports with the SEC;

11

- ;

e. WorldCom was followed by numerous securities analysts;

f. The market rapidly assimilated information about WorldCom that was publicly

available and communicated by the foregoing means and that information was

promptly reflected in the price of WorldCom's common stock; and

g. The misrepresentations and omissions alleged herein would tend to induce a

reasonable investor to misjudge the value of WorldCorn's common stock.

F

SCIENTER

35. The Individual Defendants acted with scienter in that they knew that the financial

statements issued and disseminated by WorldCom were materially false and misleading, or that the

statements therein were made and distributed with reckless disregard for facts that WorldCorn either

knew or should have known. The Individual Defendants knew or recklessly disregarded the fact

that such misleading statements would be distributed and disseminated to the investing public, and

substantially participated in and/or acquiesced in the issuance and dissemination of such statements

in violation of the federal securities laws.

36. The Individual Defendants either knew that such statements were false and

misleading or acted with reckless disregard of such falsity since, as officers and directors of

WorldCom, the Individual Defendants knew of (or alternatively had free and unfettered access to

materials that would have revealed) the improper accounting with respect to WorldCom's goodwill

and other intangible assets and resultant earnings inflation. If the Individual Defendants did not

have actual knowledge of the misrepresentations and omissions alleged, then they were reckless in

failing to obtain such knowledge by deliberately refraining from taking those steps necessary to

12

_ .

discover whether statements disseminated by WorldCom were true.

37. The Individual Defendants also had substantial economic motives to conceal the true

facts regarding WorldCom' s accounting, including the following. By concealing such facts, the

Individual Defendants were able to sell WorldCom stock at artificially inflated prices at times•

relevant to the claims set forth herein in at least amounts as follows: Allen, 160,000 shares for total

proceeds of $9,997,100; Bobbin, 22,000 shares for total proceeds of $1,821,820; and Galesi,

2,919,349 shares for proceeds of $26,528,727. In addition, defendants were motivated to maintain

WorldCam's stock price at an artificially high level so as not to further increase defendant Ebbers's

problems arising out of large margin loans that Ebbers took against his own WorldCom stock

which has resulted in huge margin calls since 2000. In response to the margin calls, WorldCom

improperly loaned Ebbers approximately $375 million in order to keep Ebbers afloat financially.

The drastic decrease in WorldCom' s share price has led to a commensurate increase in Ebbers's

exposure as a result of his margin borrowing and has further jeopardized WorldCom's financial

status.

38. Defendant Andersen acted with scienter in that: a) it knew that WorldCom' s

financial statements, which included Andersen's unqualified opinion, issued or disseminated in the

name of WorldCom, were materially false and misleading, or were made with reckless disregard

of facts that Andersen knew or should have known as WorldCom's auditor; b) knew or recklessly

disregarded that such documents would be issued or disseminated to the investing public; and c)

knowingly and substantially participated or acquiesced in the issuance and/or dissemination of such

documents in violation of the federal securities laws.

13

AS AND FOR A FIRST CLAIM AGAINST ALL DEFENDANTS FOR VIOLATIONSOF SECTION 10(B) OF THE SECURITIES EXCHANGE ACT OF 1934

AND RULE 10B-5 PROMULGATED THEREUNDER

39_ Plaintiffs repeat and reallege the allegations set forth above as though fully set forth

herein, ..

40. During the Class Period, the Defendants carried out a plan, scheme and course of

conduct which was intended to and, throughout the Class Period, did: (a) deceive the investing

public, including Plaintiffs and other Class members, as alleged herein; (b) artificially inflate and

maintain the market price of WorldCom common stock; and (c) cause Plaintiffs and other members

of the Class to purchase WorldCom stock at artificially inflated prices. In furtherance of this

unlawful scheme, plan and course of conduct, Defendants took the actions set forth herein.

41. Defendants: (a) employed devices, schemes, and artifices to defraud; (b) made

untrue statements of material fact and/or omitted to state material facts necessary to make the

statements not misleading; and (c) engaged in acts, practices and a course of business which

operated as a fraud and deceit upon the purchasers of the Company's common stock in an effort to

maintain artificially high market prices for WorldCom common stock in violation of Section 10(b)

of the Exchange Act and Rule 10b-5. All Defendants are sued as primary participants in the

wrongdoing alleged.

42. In addition to the duties of full disclosure imposed on Defendants as a result of their

making of affirmative statements and reports, or participation in the making of affirmative

statements and reports to the investing public, Defendants had a duty to promptly disseminate

truthful information that would be material to investors in compliance with the integrated disclosure

14

provisions of the SEC as embodied in SEC Regulations S -X (17 C.F.R. § 210.01 et seq.) and S-K

(17 C.F.R. § 229.10 et seq.) and other SEC regulations, including accurate and truthful inforination

with respect to the Company's operations, financial condition and performance so that the market

prices of the Company's publicly traded securities would be based on truthful, complete and

accurate information.

43. Defendants, individually and in concert, directly and indirectly, by the use of means

or instrumentalities of inteAtate commerce and/or of the mails, engaged and participated in a

continuous course of conduct to conceal adverse material information about WorldCom and its

financial condition, as set forth more particularly herein, and engaged in practices and a course of

business which operated as a fraud and deceit upon the purchasers of WorldCom securities during

the Class Period.

44. Defendants had actual knowledge of the misrepresentations and omissions of material

facts set forth herein, or acted with reckless disregard for the truth in that they failed to ascertain and

to disclose such facts, even though such facts were readily available to them.

45. Defendants' material misrepresentations and/or omissions were made knowingly or

recklessly and for the purpose and effect of artificially inflating the market price of WorldCom

stock.

46. As a result of the dissemination of the materially false and misleading information

and failure to disclose material facts, as set forth above, the market price of WorldCom's conunon

stock was artificially inflated during the Class Period. In ignorance of the fact that the market price

of WorldCom's shares was artificially inflated, and relying directly or indirectly on the false and

misleading statements made by Defendants, or upon the integrity of the market in which the

15

PIP securities trade, and/or the absence of material adverse information that was known to or recklessly

disregarded by Defendants butnot disclosed in public statements by the defendants during the Class

Period, Plaintiffs and the other members of the Class acquired WorldCom common stock during

the Class Period at artificially inflated prices and were damaged thereby.

47. At the time of said misrepresentations and omissions, Plaintiffs and other members

of the Class were ignorant of their falsity, and believed them to be true. Had Plaintiffs and the other

members of the Class andl the marketplace known that the price of WorldCom shares had been

artificially inflated by Defendants' actions, Plaintiffs and other members of the Class would not

have purchased or otherwise acquired their WorldCom securities during the Class Period, or, if they

had acquired such securities during the Class Period, they would not have done so at the artificially

inflated prices which they paid.

48. By virtue of the foregoing wrongful conduct by Defendants, Plaintiffs and the other

members of the Class suffered damages in connection with their purchases of the Company's

securities during the Class Period.

AS AND FOR A SECOND CLAIM AGAINST THE INDIVIDUALDEFENDANTS FOR VIOLATION OF SECTION 20(A) OF THE

SECURITIES EXCHANGE ACT OF 1934

49. Plaintiffs repeat and reallege each and every allegation contained above as though

fully set forth herein, including the allegations of scienter set forth at IN 35 through 38, supra..

50. The Individual Defendants acted as controlling persons of WorldCom within the

meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level

positions, and their ownership and contractual rights, and participation in and/or awareness of the

16

WorldCom's operations, the Individual Defendants had the power to influence and control and did

influence and control, directly or indirectly, the decision-making of WorldCom, including the

wrongful acts alleged herein.

51. The Individual Defendants, by reason of their executive positions and/or board

membership and role on the WorldCom board's Audit Committee, were the controlling persons of

WorldCom and had the power and influence to cause, and did cause, WorldCom to engage in the

conduct complained of hereih. Thus, the Individual Defendants controlled the public dissemination

of the false and misleading information alleged herein and were culpable participants in the

wrongful conduct alleged herein.

52. In particular, each of the Individual Defendants had direct and supervisory

involvement in the day-to-day operations of WorldCom and, therefore, is presumed to have had the

power to control or influence the particular transactions giving rise to the securities violations

alleged herein, and exercise the same. Such transactions included, without limitation, WorldCom's

issuance and dissemination of misleading earnings reports.

53. As set forth above, Defendants each violated § 10(b) and Rule 10b-5 by their acts

and omissions as alleged in this Complaint. By virtue of their positions as controlling persons of

defendant WorldCom, the Individual Defendants are liable pursuant to § 20(a) of the Exchange Act.

As a direct and proximate result of Defendants' wrongful conduct, Plaintiffs and the Class suffered

damages in connection with their purchases of WorldCom common stock.

t;

17

AS AND FOR A THIRD CLAIM AGAINST ALL DEFENDANTSFOR COMMON LAW FRAUD

54. Plaintiffs repeat and reallcge each of their previous allegations as though fully set

forth herein.

55. Defendants owed Plaintiffs and the Class a duty of full disclosure, honesty, candor,

and a duty to exercise reasonable care in making public statements regarding WorIdCom's business,

financial results and operations.

56. In furtherance of the unlawful course of conduct alleged herein, and with intent to

deceive investors, Defendants employed a scheme and artifice to defraud, as a part of which

Defendants made and/or participated in the making of the misrepresentations and omissions of fact

to Plaintiffs and the Class regarding WorldCom's business as alleged herein.

57. The aforementioned material misrepresentations and omissions of material facts were

made by Defendants intentionally, with knowledge that they were false, or in reckless disregard of

their falsity, to artificially inflate the market price of WorldCom's common

stock. Defendants knew that Plaintiffs and the Class were relying on their misrepresentations and

omissions as well as the artificially inflated market price of WorldCom's common stock.

58. As a direct and proximate result of such unlawful conduct. Plaintiffs and the Class

have suffered money damages.

18

AS AND FORA FOURTH CLAIM AGAINST DEFENDANT ANDERSEN FORNEGLIGENT MISREPRESENTATION OR INTENTIONAL DECEIT UNDER

THE COMMON LAW OF THE STATE OF NEW YORK

59. Plaintiffs repeat and reallege each of their previous allegations as though fully set

forth herein.

60. Defendant Andersen owed a duty to Plaintiffs and the Class to state all facts within

its possession in connection with its role as auditor of WorldCom. By reason of the allegations

herein, the statements in WorldCom's public SEC filings and elsewhere were materially false and

intentionally misleading. In addition, Andersen's unqualified opinions in connection therewith

were materially false and intentionally misleading.

61. Defendant Andersen was negligent in making such statements. Alternatively,

Andersen intentionally deceived Plaintiffs and the Class. Plaintiffs and the Class relied on these

statements or omissions and suffered damages thereby.

62. As a direct and proximate result of such unlawful conduct, Plaintiffs and the Class

have suffered money damages, and Defendant Andersen will be unjustly enriched.

JURY DEMAND

63. Plaintiffs demand a trial by jury.

PRAYER FOR RELIEF

WHEREFORE, Plaintiffs, on behalf of themselves and on behalf of the Class, pray

for judgment as follows:

19

A. Declaring this action to be a class action pursuant to Rule 23(a) and (b)(3) of the

Federal Rules of Civil Procedure and certifying Plaintiffs as class representative of the Class and

their counsel as class counsel;

B. Awarding damages against Defendants, jointly and severally, including disgorgement

of all unjust enrichment, for damages suffered as a result of Defendants' violation of the securities

laws, as well as punitive damages pursuant to the common law of the State of New York;

C. Awarding Plaintiffs and the Class prejudgment and post-judgment interest, as well

as their reasonable attorneys' and expert witnesses' fees and other costs; and,

D. Awarding such other and further relief as this Court may deem just and proper.

DATED: New York, New YorkApril 30, 2002

LOVELL ,EWART, LLP,_

•-7--;;;-,Q__

C s - Lovell (CL 2595)Victor E. Stewart (VS 4309)Christopher J. Gray (CO 0334)500 Fifth AvenueNew York, NY 10110(212) 603-1900

Attorneys for Plaintiffs

,•

1

20

I.

CEkTIFICATION OF NAMED PLAINTIFFPURSUANT TO FEDERAL SECURITIES LAWS

I, Bruce Fadena, do hereby c4tify that:

1. / am tnistee of the Albert Fadein Trust. I have reviewed the Fad= v. Worldcont Inc. a al. complaint prepared by Lovell & Stewart, I...LP, and authorize its filing on behalfof the Albert Farlem Trust. I ago designate Lovell & Stewart, LLP as my counsel in thisaction for all purposes.

2. I did not aFquIre or buy the shares of Worldcorn stock that are the subject of theaforesaid Complaint at the direction ()fray counsel (lawyer) or in order to participate inany private action arising under the Securities Exchange Act of 1934, as amended by thcPrivate Securities Litigation Reform Act of 1995.

3. I am willing to serve as a representative party on behalf of a class of WcalcicolnInc. shareholders, including providing testimony at deposition and trial, if necessary.

4. I engaged in the following transaction(s) involving Worldcotn (WCOM) shares:

Till in as appropriate)

TRANSACTION DATE NUMBER OF PRICE PER(purchase or tale) SHARES SHARE

A. Acquisition 211100 900 43.67

B. Stock Dividend 6/13/01 35

C. Sale 6/14/01 55 18.81

D. Sale 6119/01 500 15.20

5, I am not seeking and have not sought to serve as a representative party on behalfof a class in any other action brought under the federal securities laws thaz was filedduring the three-year period preceding (before) the date of this certification except asindicated below:

Fadem Tnist v. Merrill Lynch et al_ Ol CV 7161 (SWK)

;:-`•

. -

-

7!

6. I will not accept any payment for serving as a represerative party on behalf ofthe Class beyond my pro rata (based on how much stock I own) share of any recovery,except such reasonable costs and expenses Of any) that I incur directly relating to therepresentation of the Class and my activities in the lawsuit, as ordered or approved by theCourt.

7. 1 certify under penalty of perjury that the foregoing is true and correct.

Execvted this 30 day of April , 2002.

.40r '-gnaturc)B - Fad s.3136 E. 58* Pl.Tulsa, OK 74105Fax (918) 743-7178

t •