The following is a chronology of key events in the
history of WorldCom Inc.
1983: Businessmen Murray Waldron and William
Rector sketch out a plan to create a discount long
distance provider called LDDS (Long-Distance
Discount Service).
1985: Early investor Bernard Ebbers becomes chief
executive officer of LDDS.
1989: LDDS becomes public through the acquisition
of Advantage Companies Inc.
1992: LDDS merges in an all-stock deal with discount
long distance service provider Advanced
Telecommunications Corp.
1993: LDDS acquires long distance providers
Resurgens Communications Group Inc and
Metromedia Communications Corp. in a three-way
stock and cash transaction that creates the fourth-
largest long-distance network in the United States.
1994: LDDS acquires domestic and international
communications network IDB Communications
Group Inc. in an all-stock deal.
1995: LDDS acquires voice and data transmission
company Williams Telecommunications Group Inc.
for $2.5 billion and changes its name to WorldCom
Inc.
1996: WorldCom merges with MFS Communications
Company Inc. and UUNet Technologies Inc.
1998: WorldCom completes three mergers: with MCI
Communications Corp. ($40 billion)the largest in
history at that timeBrooks Fiber Properties Inc.
($1.2 billion) and CompuServe Corp ($1.3 billion).
1999: WorldCom and Sprint Corp. agree to merge.
2000: U.S. and European regulators block proposed
merger with Sprint; WorldCom and Sprint terminate
agreement.
2001: WorldCom merges with Intermedia
Communications Inc., a provider of data and Internet
services to businesses.
2002:
* March 11: WorldCom receives a request for
information from the U.S. Securities and Exchange
Commission relating to accounting procedures and
loans to officers.
* April 3: WorldCom says it is cutting 3,700 jobs in
the U.S. or 6 percent of WorldCom group's staff, 4
percent of WorldCom's overall work force.
* April 22: Standard & Poor's cuts WorldCom's long-
term and short-term corporate credit ratings.
* April 23: Moody's Investors Service cuts
WorldCom's long-term ratings. Fitch cuts the
company's ratings, saying it expects WorldCom's
revenue to deteriorate during 2002, with prospects
for recovery in 2003 uncertain.
* April 30: WorldCom Chief Executive Officer Bernard
Ebbers resigns amid slumping share prices and a SEC
probe of the company's support of his personal loans.
Vice Chairman John Sidgmore takes reins of
company.
* May 9: Moody's cuts WorldCom's long term debt
ratings to junk status, citing the company's
deteriorating operating performance, debt and
expectations for further weakness.
* May 10: Standard & Poor's cuts WorldCom's credit
rating to junk status.
* May 13: Standard & Poor's removes WorldCom
from its S&P 500 Index.
* May 15: WorldCom says it would draw down a
$2.65 billion bank credit line as it negotiates for a
new $5 billion funding pact with its lenders.
* May 21: WorldCom says it will scrap dividend
payments and eliminate its two tracking stocks, one
that reflects its main Internet and data business and a
second that reflects its residential long-distance
telephone business.
* May 23: WorldCom secures $1.5 billion in new
funding to replace a larger, $2 billion credit line.
* June 5: WorldCom says it will exit the wireless
resale business and will cut jobs to reduce expenses
and pare massive debts.
* June 25: WorldCom fires its chief financial officer
after uncovering improper accounting of $3.8 billion
in expenses that covered up a net loss for 2001 and
the first quarter of 2002. The company also says it
will cut 17,000 jobs, more than 20 percent of its
workforce.
* June 26: Nasdaq market halts trading in
WorldCom's two tracking stocks, WorldCom Group
and MCI Group. Shares of WorldCom touched as low
as 9 cents before the halt. President George W. Bush
calls for full investigation of the matter.
* June 28: WorldCom lays off 17,000 workers --
including about 2,000 in the Washington area.
* July 1: WorldCom reveals that an internal
investigation has uncovered questionable accounting
practices stretching back as far as 1999.
* July 2: WorldCom chief executive John Sidgmore
appeared at a Washington press conference to
apologize for the company's accounting scandal. He
also said the company hopes to avoid a bankruptcy
filing.
* July 8: Former top WorldCom executives Bernard
Ebbers and Scott D. Sullivan refuse to answer
questions posed by a congressional committee.
* July 9: WorldCom CEO John W. Sidgmore says the
company has only enough cash to keep operating for
two more months and that it is growing more likely
the telecommunications giant will file for bankruptcy
protection.
* July 11: In a live Web discussion on
washingtonpost.com, Sidgmore says Worldcom will
not sell off core Internet operations.
* July 11: A congressman tells the news media that
former WorldCom Inc. chief financial officer Scott D.
Sullivan told company lawyers that he informed ex-
chief executive Bernard J. Ebbers about bookkeeping
maneuvers that made the company look more
healthy than it really was.
* July 17: A source tells The Washington Post that
WorldCom has secured a $2 billion financing package
that it would use to operate under bankruptcy
protection.
* July 21: WorldCom files for bankruptcy protection,
listing some$107 billion in assets and $41 billion in
debt, on a consolidated basis as of March 31, the
largest such filing in U.S. history. CEO Sidgmore says
the company plans to emerge from protection within
9 to 12 months. The company will have access to up
to $2 billion in funding but does not plan to tap all of
it.
* July 29: WorldCom names two specialists from
AlixPartners LLC to oversee its reorganization and
straighten its finances. Gregory Rayburn was
appointed chief restructuring officer and John Dubel
was hired as chief financial officer.
* August 1: WorldCom's former Chief Financial
Officer Scott Sullivan and former Controller David
Myers are arrested for their role in the scandal. The
two were charged in a seven-count complaint
accusing them of securities fraud and filing false
statements with the Securities and Exchange
Commission.
* August 9: WorldCom's internal auditors have
uncovered an additional $3.8 billion in improper
accounting, doubling the amount of its known
accounting errors to more than $7.6 billion over the
past two years.
* August 17: The Washington Post reports that
members of WorldCom's board support removing
CEO John Sidgmore.
* August 22: News report state that a complex deal
with WorldCom accounts for some of the revenue
America Online previously announced it may have
improperly booked.
* August 26: Salomon Smith Barney, the investment
banking firm, discloses that it rewarded some
WorldCom executives with IPO stock. Critics said the
practice raises concerns because it could amount to
an improper reward for WorldCom officials for
bringing lucrative banking business to Salomon. The
WorldCom executives were able to reap financial gain
from selling the IPO stock. WorldCom founder
Bernard Ebbers and former CFO Scott Sullivan
received shares, according to subsequent news
reports.
* September 11: WorldCom chief executive John W.
Sidgmore agrees to step aside from his top post.
* September 27: WorldCom Inc.'s former controller,
David F. Myers, pleaded guilty to three counts of
conspiracy, securities fraud and making false
statements to the Securities and Exchange
Commission. Myers is the first WorldCom executive
to fall in the largest accounting scandal in U.S. history.
* October 7: Buford Yates Jr., WorldCom Inc.'s former
accounting director, pleads guilty to two counts of
securities fraud and conspiracy.
* October 10: Prosecutors charge two former finance
officials, Betty L. Vinson and M. Normand, with two
counts of conspiracy and securities fraud in separate
proceedings.
* Nov. 6: SEC expands fraud case against WorldCom
Inc., with claims that the company's improper
bookkeeping dates back to at least 1999, totaling
over $9 billion in fraudulent activity.
* Nov. 21: WorldCom plans to lay off 3,000 workers
in coming month in effort to trim company costs and
emerge from bankruptcy.
* Nov 27: WorldCom reaches initial settlement with
SEC, in which the company must continue to submit
to federal oversight. The question still remains
whether the company will be subject to a fine.
* Dec. 16: Judges approve employment contract that
entitles new CEO, Michael D. Capellas, $20 million
over three years.
* Dec. 18: Six WorldCom directors resign.
* Dec. 20: Despite financial woes, WorldCom is
awarded contract to provide global communications
service to State Department.
2003
* Feb. 3: WorldCom announces that it will lay off
5,000 more employees.
* March 12: Federal prosecutors ask WorldCom to
delay release of the company's accounting
investigations while they examine new evidence that
could incriminate former CEO, Bernard J. Ebbers.
* March 14: WorldCom announces that it will take
one-time $79.8 billion write-off.
* April 15: WorldCom unveils reorganization plan
that would erase most of its debt, rename the
company after its long-distance unit, MCI, and move
its headquarters from Clinton, Miss., to Ashburn, Va.
* April 22: Former CFO, Scott D. Sullivan, pleads not
guilty today to securities and bank fraud.
* May 19: WorldCom agrees to pay investors $500
million to settle civil fraud charges.
* July 7: A federal judge approves a $750 million
settlement between WorldCom and federal
regulators.
* July 22: Verizon Communications agrees not to
oppose WorldCom's reorganization plan.
* July 26: Sources say the Justice Department is
investigating allegations that WorldCom improperly
rerouted long-distance calls.
* July 31: The General Services Administration
notifies WorldCom that it is ineligible to win new
federal contracts until it improves accounting
controls.
* August 4: WorldCom tells a federal bankruptcy
court that preliminary results from an internal
investigation found no evidence that the long-
distance telephone company tried to disguise the
origin of calls or route them improperly to avoid
paying fees to local phone companies.
* August 6: A bankruptcy judge approves a $750
million settlement of civil fraud charges made by the
Securities and Exchange Commission on WorldCom
investors' behalf.
* August 12: WorldCom appoints former AT&T Corp.
executive Richard R. Roscitt as its new president and
chief operating officer.
* August 27: Oklahoma Attorney General W.A. Drew
Edmondson files criminal charges against WorldCom
Inc. and six former executives, including founder
Bernard J. Ebbers.
* Sept. 3: Former WorldCom Inc. chief executive
Bernard J. Ebbers pleads not guilty to charges that he
violated Oklahoma fraud and securities laws.
* Sept. 9: Two groups of dissident creditors abandon
their legal challenge to the company's reorganization
plan in return for a combined payout of more than
$400 million.
* Sept. 12: A federal bankruptcy judge signs off on
WorldCom's revised bankruptcy plan today and
allowed the company to send it out to creditors for
their approval.
* Sept. 15: WorldCom Inc.'s internal and external
auditors testify in U.S. Bankruptcy Court that the
company's books remain a tangled mess.
* Oct. 13: AT&T Corp. agrees to drop objections in
federal bankruptcy court to portions of WorldCom
Inc.'s reorganization plan.
* Oct. 14: WorldCom Inc. announces the appointment
of a chief ethics officer who will report directly to the
chief executive.
* Oct. 15: A federal bankruptcy judge in New York
hears the last remaining objections to WorldCom
Inc.'s plan for reorganization.
* Oct. 21: The federal judge overseeing WorldCom's
bankruptcy case has ordered the company to
respond to the concerns of a small group of creditors
who object to the plan.
* Oct. 31: U.S. Bankruptcy Judge Arthur J. Gonzalez
approved WorldCom Inc.'s reorganization plan.
* Dec. 22: Federal prosecutors say they intend to
show that former WorldCom Inc. chief financial
officer Scott D. Sullivan was involved in 13 kinds of
accounting fraud in addition to the financial
wrongdoing with which he is charged.
2004:
* Jan. 7: The government lifts a five-month
suspension that had kept WorldCom from receiving
new federal contracts.
* Jan. 12: Company officials say WorldCom is putting
the finishing touches on three years of financial
restatements but should emerge from bankruptcy
protection by a court-imposed deadline of Feb. 28,
2003.
* Jan. 15: Sources confirm that WorldCom is planning
to lay off an additional 1,700 employees, about 3
percent of its workforce.
* March 15: WorldCom becomes the latest in a string
of companies to split the jobs of chairman and chief
executive.
* April 20: MCI officially emerges from bankruptcy,
21 months after filing the largest Chapter 11 case in
history.
* May 10: MCI says it will eliminate 7,500 jobs, or 15
percent of its workforce.
* Aug. 12: The Justice Department gives a New York
investment firm permission to acquire a controlling
stake in MCI Inc.
* Sept. 28: A private buyout firm that had said it was
seeking to take control of MCI Inc. sells its 5 percent
stake in the long-distance giant.
2005:
* Jan. 8: The lead plaintiff in the WorldCom class-
action suit formally announces a $54 million
settlement covering 10 former WorldCom directors.
* Jan. 19: Jury selection begins in the trial of
WorldCom's former chief executive, Bernard J.
Ebbers.
* Jan. 25: Opening statements are heard in the trial of
Bernard J. Ebbers.
* Feb. 2: A federal judge rejects part of a
groundbreaking settlement in which 10 former
WorldCom directors agreed to pay $54 million to
settle a shareholder lawsuit.
* Feb. 14: Verizon Communications Inc. announces a securities fraud and making false filings with
$6.75 billion deal to buy MCI Inc. regulators.

* March 15: Former WorldCom Inc. chief executive

Bernard J. Ebbers is found guilty of conspiracy,

The meteoric rise and fall of WorldCom has been intimately linked to Wall Street investment firms -- in particular
Salomon Smith Barney and its parent company Citigroup. This chronology follows the hidden ties that enabled Wall
Street insiders to shape and profit from the company's rapid growth, while leaving ordinary investors holding worthless
stock when the bubble burst. [Editor's Note: As of June 2005, WorldCom CEO Bernard Ebbers faces sentencing for his
crimes. He was found guilty of securities fraud, conspiracy, and filing false documents with regulators.

1983 Bernie Ebbers starts a telecom company

With the breakup of AT&T, Bernard Ebbers, and several business partners see a golden opportunity to sell cheap long-
distance service. Small-town businessman Murray Waldron sketches out the details of what will become LDDS (Long
Distance Discount Service) at a coffee shop in Hattiesburg, Miss., and then Ebbers and some church buddies obtain a
$650,000 loan from a local bank to buy a computer switch to route long distance calls. Because AT&T is under court
order to lease its phone lines cheaply to start-ups, LDDS is able to offer cut rates to small businesses.

The company expands by following a strategy in which it buys up regional rivals, using LDDS stock as currency. Within 10
years, Ebbers has purchased 30 companies and LDDS sales reach nearly $1 billion. LDDS is renamed WorldCom in 1995.

1986 Ebbers meets Jack Grubman

At the time of their first meeting, Grubman is working as a telecom analyst for PaineWebber. He is hired by Salomon
Brothers in 1994 and initiates coverage of LDDS at Salomon in May 1995, rating the stock a "buy," and upgrading it to a
"strong buy" in December 1996.

During the 1990s, Grubman comes to personify a new type of Wall Street analyst -- one celebrated for his close
relationship with management of the companies he covers. He advises Ebbers on WorldCom deals, and attends three
WorldCom board meetings. Although Grubman tells a congressional subcommittee in 2002 that he and Ebbers were
limited to a good "working relationship," reportedly Grubman boasts to investors and rival analysts of their friendship,
mentioning his invitation to Ebbers' very private wedding in March 1999.

1994-5 LDDS continues expansion, changes name to Worldcom

In December 1994, LDDS merges with IDB WorldCom and a few months later it announces the purchase of WilTel
Network Services of Tulsa, Okla. for $2.5 billion in cash. At the LDDS annual meeting in May 1995, the company changes
its name to WorldCom.

Feb. 1, 1996 Congress passes Telecommunications Act

The Telecommunications Act is designed to open up the telecom industry to greater competition by allowing the
regional "Baby Bells" to enter the long-distance market if they open up their local monopolies to competition. (Previous
regulatory restrictions had prevented local and long-distance companies from competing against each other.)

Because of the difficulty in reconciling various technical and economic obstacles, Congress instructs Reed Hundt, then
chairman of the Federal Communications Commission (FCC), to spend six months writing new rules to control the
deregulation process. The Baby Bells urge Hundt to move slowly, while long-distance companies, including WorldCom,
press him to act quickly in order to speed their entry into the Bells' local markets. Bernie Ebbers spends two days in June
lobbying Hundt for faster deregulation.

On Aug. 8, 1996 the FCC releases a 682-page "interconnection order" which sets the rules for opening local markets.
Initially, the rules are tilted against the Baby Bells' in favor of their competitors.

As old-fashioned telephone networks are being transformed into the backbone for the Internet, there is a large need for
building new fiberoptics systems. Wall Street sees a potential gold mine for raising capital to finance the growth, for
bringing new telecoms public, and for helping the burgeoning telecom industry finance corporate mergers, and sell
corporate bonds.

Mid 1990s Grubman develops his telecom thesis

Grubman, who had spent eight years working at AT&T before moving to Wall Street, concludes that following the
Telecom Act and the breakup of AT&T, newer startup entrants into the telecom industry could gain market share
through rapid growth and innovation. He advises companies like WorldCom to take on the industry giants by growing
through mergers and acquisitions.

1996 Worldcom continues its stellar rise

According to a Wall Street Journal article on Feb. 29, 1996, WorldCom provided investors with returns of 57.3 percent a
year over the previous 10 years. The article states: "A $100 investment in WorldCom in 1989, for instance, would be
worth $1,580 by January; that, according to the company, is about 10 times the best return generated by WorldCom's
primary competitors, the Big Three of long distance: AT&T Corp., MCI Communications Corp. and Sprint Corp."

In August, WorldCom purchases MFS Communications and UUNet, the major Internet carrier, in a $12 billion stock swap.
The merger creates the first fully integrated local and long-distance phone company since the old Bell system. Grubman
helps to arrange the deal, which brings Salomon $7.5 million in fees.

September 1997 Travelers Group buys Salomon Inc.

Engineered by Travelers CEO Sanford Weill, the $9 billion stock swap combines the bond-trading firm Salomon Brothers
and Smith Barney, a primarily retail brokerage, into an investment bank powerhouse.

November 1997 Worldcom and MCI announce merger

At the time, MCI -- which had been close to merging with British Telecom -- is more than three times the size of
WorldCom. The takeover is the largest in history -- WorldCom pays $37 billion in stock for the deal in which MCI's long-
distance assets are joined with WorldCom's local phone and Internet businesses. MCI WorldCom becomes the second
largest U.S. long-distance company.

WorldCom is advised on the deal by Salomon and Jack Grubman, who is so involved that he is listed as a financial adviser
on the transaction by WorldCom's board, and he also acts as a proxy solicitor among WorldCom stockholders to get
them to approve the deal. Grubman attends a November meeting of WorldCom's board in order to provide comments
on the industry's potential reaction to the merger. According to The Wall Street Journal, Salomon earns $32.5 million for
advising WorldCom on the MCI deal.

April 6, 1998 Citicorp and Travelers announce merger of equals

In a brazen deal, Sanford I. Weill, chairman of the Travelers Group and John S. Reed, chairman of Citicorp, announce a
merger of their giant financial empires in a $70 billion stock swap that dwarfs the WorldCom-MCI merger. The 1998
merger, which was engineered by Weill, brings together such brand names as Citibank, Travelers, Salomon Smith
Barney, and Primerica. Because this deal goes beyond the limits of existing laws, Weill, joined by Reed, privately obtains
temporary approval of the deal from Alan Greenspan, chairman of the Federal Reserve Board, and then helps mobilize
the financial services industry to lobby Congress to repeal restrictive banking laws. Reed and Weill announce they will
jointly run the new superbank, but Reed eventually resigns in early 2000 after losing a power struggle to Weill.

April 1999 Sweetheart deals and the Rhythms Netconnections IPO

Former Salomon Smith Barney brokers say that during the late 1990s stock market bubble, Grubman and his team
develop a strategy to win telecom banking deals by awarding favored customers, such as Bernie Ebbers, shares in hot
telecom initial public offerings (IPOs), a practice known as "spinning." Grubman denies any involvement in IPO
allocations. Salomon Smith Barney later tells Congress that Bernie Ebbers made $11 million through 21 Salomon Smith
Barney-sponsored IPO allocations.

However, according to a lawsuit filed by former Salomon Smith Barney broker David Chacon -- and disputed by the firm -
- Grubman oversaw the awarding of IPOs to favored telecom clients, and Ebbers makes $16 million in one deal alone.
Chacon's lawsuit states that Ebbers received 350,000 shares in the IPO of a company called Rhythms NetConnections.

Oct. 6, 1999 Worldcom announces plans to acquire Sprint

Grubman attends a WorldCom board meeting on Oct. 4, where directors decide to pursue a merger with Sprint. If
WorldCom had completed the $115 billion deal, which would have joined the second- and third-largest long-distance
carriers, it would have been the largest merger in history. The merger is met with immediate skepticism by European
regulators, who oppose it, influencing U.S. federal regulators, including Joel I. Klein at the Justice Department's antitrust
division, and Bill Kennard at the FCC.

In June 2000, both U.S. and European regulators announce intentions to block the deal. The U.S. Justice Department
argues that the merger would limit competition in the long-distance market, while European Union regulators say it
would place too much of the Internet under one company. The plans for the merger are finally called off on July 13,
2000.

November 1999 Grubman upgrades AT&T stock rating

In the fall of 1999, Grubman upgrades AT&T from a "neutral" to a "buy" rating after months of pressure to "take a fresh
look" from Citigroup CEO Sandy Weill, a member of AT&T's board of directors. Grubman, who thought AT&T was too
sluggish and mired down by old methods and technologies, had long been bearish about his former employer. A
subsequent investigation by New York State Attorney General Eliot Spitzer uncovers several conflicts of interest
surrounding Grubman's upgrade that are not disclosed to investors at the time.
Spitzer's team unearths a November 1999 memo that Grubman had written to Weill in which he asks for Weill's
assistance in gaining admission for his children into the 92nd Street Y's exclusive preschool. After the AT&T upgrade and
after Grubman's children are admitted to the school, Weill arranges for Citigroup to provide a $1 million donation to the
92nd Street Y.

Grubman later tells a social friend in an e-mail that he had upgraded AT&T's stock to get his kids into the school and so
Weill could secure AT&T CEO Michael Armstrong's support in his power struggle with Citigroup co-CEO John Reed, who
resigns after losing a power struggle with Weill in early 2000. Weill denies giving Grubman a direct order to upgrade
AT&T, and he is ultimately cleared of this charge by Spitzer's investigation. Weill maintains that the reason driving his
request is his firm belief in the value of AT&T, of whose board of directors he was a member at the time. Grubman
disavows the e-mail when it becomes public and says he had written it to impress a colleague.

However, a second conflict of interest uncovered by Spitzer's team involves AT&T's spinoff of its wireless division, that
the company prepared in the late fall of 1999. The offering becomes the largest IPO in history, and in February 2000,
Salomon is named as one of the lead underwriters. The brokerage earns $63 million in fees from the offering. Critics
argue that Grubman's upgrade entails a quid pro quo for Salomon to win AT&T's banking business -- a charge that
Grubman denies.

Late 1999 Ebbers receives $1 billion mortgage from Citigroup

Joshua Timberlands, a company controlled by Bernie Ebbers, receives a $499 million loan, which is later folded into $1
billion mortgage from Citigroup's Travelers unit for the purchase of half a million acres of timberland in Mississippi,
Alabama and Tennessee. By taking a loan instead of selling stock, Ebbers is able to convert his WorldCom wealth into
hard assets.

The timberlands are just one part of Ebbers' developing private business empire, which eventually includes luxury
yachts, a boat-building company, and a lumber mill. Ebbers also takes out a separate $43 million loan to finance the
purchase of a 500,000-acre ranch -- the largest ranch in Canada. This loan, attorneys say, is financed by Citibank and also
backed by Ebbers' WorldCom stock.

Attorneys for pension funds which have sued Citigroup and other banks, seeking to recover heavy losses on WorldCom,
argue that Citigroup should have disclosed to investors that Citibank had an interest in keeping the price of WorldCom
stock inflated in order to cover the loan. They also protest that investors were not informed that Travelers, owned by
Citigroup, actually became a business partner of Ebbers through Joshua Timberlands.

January 2000 Robert Rubin foreshadows a telecom bubble

At an annual Salomon Smith Barney conference for major telecom investors, former Treasury Secretary Robert Rubin,
recently hired as Sandy Weill's chief lieutenant at Citigroup, gives a sobering speech to counter what he calls "excesses
and imbalances that may pose real risk to our economic well-being," -- excessive optimism in the stock market. Rubin
cautions that stocks are highly overvalued, cites a perilous "tendency of lenders to forego discipline in credit
extensions," and warns of the dangers of discounting the risks in new technologies. Drawing parallels to similar
optimism before the 1929 stock market crash, Rubin quotes the philosopher George Santayana that "those who forget
history are condemned to relive it."
Telecom analyst Susan Kalla, who heard the speech, tells FRONTLINE that she was so alarmed that she sold all her
telecom stocks within a few days. Dan Hesse, former CEO of AT&T Wireless, who heard Rubin tell the head table that he
was "out of the market himself," says he regrets not following Rubin's advice. But when Kalla asks Jack Grubman his
reaction to Rubin's speech, Grubman brushes off Rubin's statements. Kalla says Grubman told her, "Stocks go up, stocks
go down. Doesn't matter."

December 2000 Spitzer begins his investigation

Eliot Spitzer, New York State's attorney general, begins his investigation of Wall Street stock research analysts, his
interest triggered by stockholder complaints and efforts to recover stock losses through arbitration. Spitzer's
investigation begins with a focus on Merrill Lynch and its well-known stock analyst Henry Blodget.

Early 2001 Worldcom accounting tricks begin

According to government indictments, Scott Sullivan, WorldCom's CFO, begins the process of misallocating as capital
expenditure what should have been normal expenses, thus turning profits into losses for 2001 and the first quarter of
2002. The accounting tricks -- which ultimately total $9 billion -- are not discovered by internal auditor Cynthia Cooper
until June 2002.

May 2001 and May 2002 Worldcom bond offering

Desperate for cash and with its stock price tumbling, WorldCom floats two bond offerings in May 2001 and May 2002
that total $17 billion. Despite a glut in telecom capacity, plummeting phone prices and Robert Rubin's personal call for
greater discipline in credit extension, Citigroup's Salomon Smith Barney leads two banking syndicates that market the
WorldCom bonds to public investors. Attorneys for pension funds that invested in the WorldCom bonds contend that in
sponsoring the bond offerings, Citigroup is limiting its own exposure through loans or open lines of credit offered to
WorldCom -- a fact not disclosed to shareholders. With its prices falling sharply, analyst Jack Grubman tells investors that
WorldCom stock has become an incredible bargain. Citigroup now faces multiple shareholder lawsuits as a result of the
WorldCom bond offering and Grubman's advice to shareholders.

March 2002 Spitzer turns his investigation to Salomon Smith Barney

After finding conflicts between the public stock recommendations and private e-mail comments by Merrill Lynch analyst
Henry Blodget, Spitzer decides to broaden his investigation of stock market analysts to a dozen investment banks. The
overall investigation grows to involve the Securities and Exchange Commission (SEC), the New York Stock Exchange
(NYSE), the National Association of Securities Dealers (NASD), the North American Securities Administrators Association
(NASAA), and market regulators in 10 states. The various regulators divide up the investigation and Spitzer's team
chooses to look into Morgan Stanley Dean Witter and Salomon Smith Barney -- and in particular, SSB analyst Jack
Grubman.

April 2002 Grubman drops his rating on Worldcom

On April 22 -- after the stock had fallen 94 percent from its June 1999 peak -- Grubman downgrades his rating on
WorldCom from a "buy" to a "neutral." He never puts a "sell" rating on the stock before it is de-listed.

April 2002 Ebbers resigns

With the SEC investigating WorldCom's accounting practices, and having lost support from WorldCom's board of
directors, Ebbers resigns as CEO. A major factor in his resignation is the $366 million in personal loans he had been
granted by the company to cover private investments -- loans backed by WorldCom stock. According to The Wall Street
Journal, when WorldCom granted Ebbers the loans, its stock had been trading around $24, but by the time of his
resignation it is valued at less than $3 per share.

June 2002 Worldcom announces massive accounting fraud

On June 25, WorldCom admits that it had inflated its earnings by $3.8 billion -- the largest accounting fraud in history.
WorldCom CFO Scott Sullivan is fired and arrested two months later on charges of securities fraud, conspiracy and filing
false statements with the Securities and Exchange Commission (SEC). In August and again in November, WorldCom
revises its financial statements, raising the total amount discovered from improper accounting procedures to $9 billion.
WorldCom files for bankruptcy in July.

July 2002 Grubman professes ignorance

When questioned by Congress in July, Grubman maintains that he saw no red flags in WorldCom's accounting
procedures. However, he does not disclose to Congress that a few weeks earlier he had written e-mails coaching Bernie
Ebbers on what to tell Wall Street analysts about WorldCom's finances. One such e-mail notes: "integrity of accounting --
big issue. Investors worry that some bombshell will come out." When Ebbers briefs stock analysts a few days later, he
follows Grubman's script.

August 2002 Grubman leaves Salomon Smith Barney

Under fire from investors who lost an estimated $2 trillion in telecom stocks, and sharply criticized by scores of Salomon
Smith Barney stockbrokers who had advised customers based on his research, Grubman leaves Salomon Smith Barney
by "mutual agreement." He receives a severance package worth $30 million, and Salomon agrees to cover his legal bills.
The severance includes a $200,000 per year retainer to keep Grubman available to Citigroup and Salomon to help with
their defense against lawsuits and government charges.

December 2002 Spitzer and regulators announce preliminary settlement

Eager to get the scandals and Spitzer's investigation behind them, Citigroup and nine other Wall Street banks strike a
deal with the regulators in which the banks agree to pay $1.4 billion and Spitzer agrees not to pursue criminal
prosecutions. The banks also say they will stop the practice of "spinning" -- IPO allocations to corporate executives in
hopes of winning future business -- and promise to insulate research analysts from investment banking.

Spitzer's investigation clears Sandy Weill of any criminal wrongdoing. Grubman is also promised that he will not face
criminal charges from Spitzer. But he agrees to a lifetime ban from the securities industry and payment of a $15 million
fine.

A final settlement is announced on April 28. Among the new provisions is the revelation that Sandy Weill is personally
prohibited from talking to Citigroup analysts about their research outside of the presence of company lawyers.