Former Tenet Healthcare Corp. Chief Executive Jeffrey C. Barbakow cashed in $111 million of his stock options in 2002, just months before the shares plummeted amid a series of scandals.
But his timing with 1.5 million shares of WorldCom Inc. turned out to be less fortuitous.
In a lawsuit, Barbakow says he lost “tens of millions of dollars” by holding on to his shares in the telecom giant as it sped toward bankruptcy in 2002.
The suit, filed in Los Angeles County Superior Court last week, asserts that Barbakow and his wife, Margo, would have sold their WorldCom shares before the firm’s collapse if they hadn’t been duped into believing that it was a “vibrant, financially secure company.”
Barbakow’s bid to recoup his WorldCom losses is “the ultimate irony,” said Paul Brickman of Tenet Shareholder Committee, an investor group.
Tenet stock, now $12.70 a share, has plunged from $52 in 2002. The Santa Barbara-based firm’s image and finances have been battered by government probes into its recruiting, its Medicare billing and alleged unnecessary surgeries. Barbakow, 60, resigned last year.
“As Mr. Barbakow cries over what happened at WorldCom and what WorldCom did to its shareholders, he should look in the mirror and think about what he did to Tenet shareholders,” Brickman said.
The Barbakows name as defendants Citigroup Global Markets, which was one of WorldCom’s investment bankers; Jack Grubman, a former telecom industry analyst at Citigroup; and Arthur Andersen, WorldCom’s former accounting firm.
The suit alleges that the defendants abetted WorldCom in “massive financial and accounting frauds” by helping it manipulate its financial statements.
WorldCom filed for bankruptcy protection in July 2002 after saying it overstated profit by billions of dollars. It emerged from bankruptcy this year and is now known as MCI Inc.
WorldCom’s investment banks have faced a torrent of lawsuits. Citigroup Inc. in May agreed to pay $2.65 billion to settle a federal class-action case, but Barbakow wouldn’t qualify to join that suit because he owned the stock before 1999.
Barbakow’s WorldCom stake came to him via his purchase of stock in L.A.-based IDB Communications Group in 1992. IDB later was bought by WorldCom.
The suit doesn’t cite a specific sum lost or say whether Barbakow eventually sold the shares. His lawyer didn’t return a call for comment.
Citigroup did not return a call for comment, and Grubman couldn’t be reached. An Andersen spokesman said “the plaintiff should direct his fire toward the WorldCom board and management.”