WorldCom Accusations Expand

Intensifying its claim that WorldCom Inc. has compromised national security, AT&T; Corp. said Wednesday that it had new evidence the carrier improperly routed calls placed by the U.S. military through Canada.

Meanwhile, WorldCom hailed a Bankruptcy Court judge’s approval of its $750-million settlement with securities regulators. Judge Arthur Gonzalez’s decision Wednesday was the last of two court approvals required to settle accounting-fraud allegations.

In its latest filing, AT&T; told Gonzalez of the U.S. Bankruptcy Court in New York that the calls diverted by WorldCom included some placed by the Defense Department, the Army and the Navy. AT&T; alleged that improper routing was occurring weekly and sometimes daily.

WorldCom insisted that it had not placed sensitive government calls at risk.

“The truth is secure government traffic travels over MCI’s network via a dedicated connection and encryption,” spokesman Peter Lucht said. “National security has not been compromised.” WorldCom is in the process of changing its corporate name to MCI.

Telecommunications analysts have said that simply diverting calls to Canada would not necessarily have made them more vulnerable to eavesdropping.

The dispute began last week when AT&T; said it had evidence that calls from the State Department and other government agencies had been routed through Canada.

Long-distance competitors have been ferociously fighting efforts by WorldCom to emerge from bankruptcy proceedings.

Although it has promised to investigate any new information, WorldCom repeatedly has characterized the charges by AT&T; as no more than a competitive ploy designed to derail the bankruptcy process.

Besides the security issue, AT&T; contends that the government might not have done business with WorldCom if it knew the carrier was diverting traffic to Canada. Last week, the U.S. government barred WorldCom from securing new federal contracts, calling the company’s ethics and internal controls inadequate.

Stasia Kelly, named this week as WorldCom’s general counsel, hailed the judge’s ruling on the settlement with the Securities and Exchange Commission as a milestone and said the company was looking forward to finishing its bankruptcy case.

“It represents additional validation of all the positive steps the company has taken over the past year to ... put its house in order,” she said.

A federal district judge approved the settlement -- which includes the largest penalty the SEC has ever reaped from a public company -- last month.