JUNEAU (AP) -- Alaska is suing several financial institutions over bond losses caused by the collapse of telecommunications giant WorldCom.
The state lost about $26 million from its Constitutional Budget Reserve, pension and other investment funds when WorldCom went bankrupt, the attorney general's office said Tuesday.
Attorney General Gregg Renkes said the financial institutions failed to inform the state and other investors about the telecommunication company's true financial situation.
A lawsuit was filed in Juneau Superior Court against 18 financial institutions including CitiGroup Inc., J.P. Morgan, and accounting firm Arthur Andersen.
The lawsuit alleges Alaska purchased WorldCom bonds based on false and misleading financial information in bond documents provided by financial institutions.
''We hope to restore money to the State of Alaska's funds and send Wall Street a message that we will hold them accountable if they abandon honesty for profits,'' Renkes said in a statement issued Tuesday.
WorldCom, the Clinton, Miss.-based parent company of long distance carrier MCI, filed for Chapter 11 bankruptcy protection last year. That followed disclosures that it had disguised more than $9 billion in expenses with fraudulent accounting.
The bankruptcy also spawned federal criminal charges against WorldCom executive Scott Sullivan, who pleaded innocent on Tuesday to charges of conspiracy, securities fraud and false Securities and Exchange Commission filings. Two other WorldCom executives have pleaded guilty to federal securities fraud charges.
The lawsuit filed this week alleges investment banks acting as underwriters for the bonds had ''virtually unbridled access'' to WorldCom's books and knew of the company's accounting irregularities.
Defendants including J.P. Morgan Securities, Inc., Bank of America Corp. and Arthur Andersen marketed WorldCom bonds in a ''multi-city roadshow'' predicting strong revenue and profit growth for the company, the lawsuit said.
The banks also made sure WorldCom purchased liability insurance on the offerings and took other steps to protect themselves before the scandal emerged, the lawsuit said.
A spokesman for CitiGroup could not be reached for comment on Tuesday.
Other defendants named in the state case are Salomon Smith Barney, Banc of America Securities LLC, ABN AMRO Inc., Deutsche Bank AG, Deutsche Banc Alex. Brown Inc., Lehman Brothers Holdings Inc., Lehman Brothers Inc., Credit Suisse Group, Credit Suisse First Boston Corp. and Nationsbanc Montgomery Securities LLC.
Alaska's lawsuit is similar to several other state cases filed around the country by governments that lost money when WorldCom collapsed.
Alaska joined Illinois, California, Ohio, West Virginia, Montana, Washington, Minnesota and Wisconsin in hiring San Diego-based law firm Milberg, Weiss, Bershad, Hynes and Lerach to represent it, said assistant attorney general Mike Barnhill.
Barnhill said he expects the state lawsuit to be moved to federal court and ultimately end up with other state suits against WorldCom money managers in a New York federal court.
Alaska lost up to $9 million from its budget reserve and another $13 million from pension funds, Barnhill said. Pension losses will not jeopardize payments to retirees, the state said.
The state Department of Revenue sold its WorldCom bonds in time to recover about 69 percent of their original purchase price, Barnhill said.
The Alaska Permanent Fund Corp. also lost about $55 million from WorldCom investments, mostly in the form of bonds.
Robert Storer, permanent fund executive director, said the fund will attempt to recoup some of its losses through a separate class action lawsuit it is currently involved in.
''I expect we will get something and no more or no less than anyone else based on our investment,'' Storer said Tuesday.
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