Analysts at three big banks expressed misgivings about the financial soundness of now bankrupt WorldCom in early 2001, months before they helped the company sell $12 billion in debt, the New York Times said on Wednesday.
Citing documents filed in a federal court in Manhattan on Monday, it said lending analysts at J.P. Morgan Chase, Deutsche Bank, and Bank of America had early concerns about WorldCom, which plans to change its name to MCI on emerging from bankruptcy.
The story also pointed out the lead role of Salomon Smith Barney unit of Citigroup in the 2001 debt offering and cited a memo suggesting the group's commercial lending to WorldCom was linked to its investment banking.
None of the four banks were immediately available to comment.
WorldCom filed for bankruptcy in 2002 amid the biggest ever accounting scandal in U.S. corporate history.
The documents described were filed in relation to a class-action lawsuit brought two years ago on behalf of the New York State Common Retirement Fund and other investors in WorldCom between 1999 and 2002, the story said.
Institutions close to WorldCom knew more than they let on to investors but acted to protect themselves from the company's shaky finances even as they sold its securities to the investing public, the Times said citing court documents.
Defendants include former WorldCom Chief Executive Bernard Ebbers, who was recently indicted on fraud charges, company directors and banks and brokerage firms that sold WorldCom securities, it said.