The banks that served as underwriters for WorldCom’s bond issuance have adopted a new defence strategy in the lawsuit filed against them by investors following WorldCom’s financial collapse in 2002: deny everything.
According to The Wall Street Journal, Jay Kasner, the attorney representing the 17 banks that served as bond underwriters for WorldCom, denied that any of the financial reports were false in a recent teleconference hearing. Yet some banks told The Wall Street Journal that they do, in fact, believe that some of the company’s financial reports were falsified.
In an attempt to clarify their position, two of the banks explained that until it can be determined which filings were falsified, the banks must maintain that the records are not false so as not to limit their legal options.
The teleconference hearing focused on answering numerous pre-trial “requests for admission” submitted by the New York State Common Retirement Fund, the lead plaintiff in the lawsuit. During the hearing, specific line items in the financial filings were discussed and WorldCom was required to confirm or deny the falsity of each one.
Judge Denise Cote found it “hard to believe” that the company was denying that the line items were false. According to a transcript of the proceedings, Judge Cote told Kasner that “it looked like the defendants were taking the position that they couldn’t agree or admit that any of the financial information provided by WorldCom in its public filings were false. That is just hard to believe.”
While Judge Cote views the banks’ stance as an across-the-board denial, Kristin Lemkau, spokesperson for JPMorgan, contends that this is not the banks’ position, according to reports in The Wall Street Journal. And a Bank of America spokesperson was reported as saying: “We do not contend that no financial fraud occurred at WorldCom.”