Salomon May Face WorldCom Suits

Salomon is believed to have been WorldCom's main merger adviser and leading underwriter in bond and stock offerings during the period and pocketed around $100m in fees in the process.

The close relationship between the two organisations is now likely to be the focus of lawsuits by disgruntled investors who have lost billions. WorldCom's acknowledgment that it hid $3.8bn in expenses must raise some questions about the thoroughness of Salomon's due diligence when it arranged and underwrote a $12bn bond offering for the company last year.

Legal experts believe, however, that it will be difficult to prove that Salomon was negligent. A spokesman for Salomon has said: 'The underwriters conducted thorough due diligence in connection with WorldCom's bond offering, including reliance on the company's audited financial statements'.

Pension funds are also thought likely to be considering bring suits against Salomon and the other banks involved in last year's bond issue. JP Morgan was a co-underwriter and Deutsche Banc Alex Brown, ABN Amro and Banc of America Securities were all managers of the offering.