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NEW YORK - WorldCom's plans to emerge seamlessly from bankruptcy as MCI appear on hold today as allegations of possibly criminal wrongdoing will be leveled against the company to a U.S. bankruptcy court, the U.S. General Services Administration (GSA) and federal prosecutors in New York. The charges involve the rerouting of telephone calls through Canada as a means to avoid tariffs owed to other telecom companies for use of their networks.

The practice is said to have been ongoing for ten years, but the charges only surfaced in the last ten weeks when a former MCI employee alerted the FBI about a company project known as "Canadian Gateway," according to various reports starting with one in The New York Times over the weekend. Now MCI's rivals, already indignant about the company's ability to shed debt in the bankruptcy process, have a club to use against the company. Many have charged, even before the call-shifting allegations became public, that bankruptcy gave MCI an unfair advantage and that it should be liquidated rather than revived.

Rerouting calls through Canada allegedly allowed MCI, a unit of WorldCom (otc: WCOEQ - news - people ), to send them back into the U.S. on AT&T's (nyse: T - news - people ) network, which would mean that AT&T would pay carrying charges that should have been paid by MCI. Related schemes were said to have laid charges off on Verizon Communications (nyse: VZ - news - people ). Some of the rerouted calls may have originated in the State Department and other federal agencies, adding a potential national security concern to the mix--if sending calls north of the border made them somehow more susceptible to electronic eavesdropping.

Now Verizon plans to urge the federal government to stop doing business with MCI, according to The Washington Post. Verizon, along with AT&T, has been asking the GSA to stop doing business with WorldCom, whose single largest customer is the federal government. It could receive as much as $800 million for phone services from federal agencies this year, the Post said. At least seven government agencies, including the National Transportation Safety Board and the U.S. Postal Service as well as the State Department, were among the customers.

AT&T, meanwhile, will present evidence of the fraud to the federal bankruptcy court that appeared poised to clear WorldCom (to be known as MCI) from the final stages of the reorganization process. The court's acceptance of WorldCom's plan of reorganization was premised on its finding that the company had purged itself of the massive $9 billion-to-$11 billion accounting fraud that tarred its recent past.

AT&T claims it paid hundreds of millions of dollars in fees that WorldCom should have paid because calls routed through Canada were made to look like they were placed by AT&T customers, the Post reported.

MCI said in a statement that "access charges between local and long-distance carriers have existed for decades and are routine in the industry. As always, we take all inquiries by the U.S. attorney's office very seriously and will cooperate fully with any investigation." All phone companies must make use of the networks of other phone companies so that any phone can ring any other phone. Hashing out who used what is an important part of the business.

The Post's report, citing unnamed sources, indicates that more than 90 people were involved in the Canadian scheme, said to be the result of extreme pressure on WorldCom employees to reduce the access charges. This is a far larger number of employees than is said to have been involved in the accounting scandal.

But the call-rerouting allegations say that MCI had been engaged in the practices for far longer than the period of the accounting fraud. There is no indication of why the charges are just being brought to light now.



Blue-Chip Companies Send More Jobs to India
Provided By Pinnacor, 08.05.03, 10:58 AM ET

A decade ago, a wag famously warned of the giant sucking sound from Mexico, which threatened to steal America's working-class jobs.

Today, the giant sucking sound comes from a different spot on the globe, and it menaces a different type of worker. India increasingly is landing high-skilled, highly paid positions for engineers, accountants and financial analysts formerly employed in the United States.

West Palm Beach-based Ocwen Financial Corp. offers a case study in how companies are cashing in on India's allure. Seeking to cut labor costs, Ocwen quietly has hired hundreds of workers during the past two years in India, where skilled workers are plentiful and wages are low.

Ocwen, which once had nearly 1,000 employees at its Palm Beach Lakes Boulevard headquarters, now employs more workers in Bangalore than in West Palm Beach. At the end of last year, Ocwen had 843 employees in two locations in India, compared with 474 in West Palm Beach and 534 in Orlando.

The reason, of course, is money. Like many U.S. companies, Ocwen has discovered well-educated, English-speaking workers come cheaper in India than in the United States.

"We established operations in India to take advantage of a highly skilled but relatively inexpensive labor force," said Mark Zeidman, Ocwen's chief financial officer.

These are not sweatshop jobs. Most of Ocwen's Indian employees are college graduates; they include 80 software developers, along with workers in residential loan servicing, human resources, accounting and risk management.

Zeidman is quick to point out that Ocwen (nyse:
OCN - news - people ), a mortgage company that sells loan-servicing software to lenders, hasn't fired workers here to hire people in India. The company still has more than 1,000 employees in Florida.

"We didn't move any positions from the U.S. to India as much as we accommodated the growth in our business by hiring employees in India rather than increasing staffing in the U.S.," Zeidman said.

Still, Ocwen plans to add even more employees in India this year and to make "a modest reduction" in its U.S. work force, according to the company's 2002 annual report. Meanwhile, its U.S. employment will shift to "a greater concentration of clerical-level employees," the company said.

Ocwen is far from alone. IBM (nyse:
IBM - news - people ) plans to move some of its software design jobs to India, The New York Times (nyse: NYT - news - people ) reported last month.

Big Blue says it's simply following its rivals. Dozens of blue-chip companies, including Microsoft (nasdaq:
MSFT - news - people ), Oracle (nasdaq: ORCL - news - people ), Bank of America (nyse: BAC - news - people ), JP Morgan Chase and General Electric (nyse: GE - news - people ), have set up shop in India. Consulting firm Forrester Research predicts that 3.3 million service-sector jobs will move from the United States to India and other nations by 2015.

Siemens Information and Communication Networks (nyse:
SI - news - people ) recently outsourced one job from Boca Raton and 11 positions from its Lake Mary plant to India. Siemens cut 300 workers in Boca this year, but a spokesman said there's no direct link between those cuts and its India expansion.

Motorola (nyse:
MOT - news - people ) and Pratt & Whitney parent United Technologies (nyse: UTX - news - people ) also have employees in India, although both companies said hiring there was not responsible for job cuts in Palm Beach County in recent years.

No CEOs or CFOs have outsourced their own positions to lower-paid executives in India. But this job shift is striking because it reaches so high up the corporate ladder, hitting the formerly cushy ranks of white-collar corner offices.

Your job could be next. Among the outsourced are computer programmers, engineers, accountants and financial analysts, not to mention thousands of less-skilled workers who answer phones at call centers.

Critics decry the job migration as shortsighted bottom feeding. By moving middle-class jobs to the Third World, corporate America is abandoning U.S. workers at a time when jobs are hard to find, said Thea Lee, chief international economist for the AFL-CIO.

"I don't doubt that it's cheaper," Lee said. "But companies need to take a slightly longer time frame rather than just cutting payroll costs right now."

Sending positions to India undermines the U.S. tax base, she says, and some politicians agree. A few in Congress have threatened to limit visas for skilled workers from other countries, and some state legislatures are pushing for limits on companies moving jobs overseas.

After a New Jersey lawmaker discovered the state's welfare bureaucracy was administered partly by workers in India, state lawmakers in New Jersey and Maryland sought to block public contracts from being serviced outside the country.

But proponents of offshore hiring chant the mantra of free markets. It's pointless to block corporate capital from flowing where it can be spent most efficiently, the argument goes. India's supply of skilled workers is abundant, so the job offers naturally follow, Zeidman said.

"One thing that has been demonstrated time and again is the futility of adopting protective economic policies that seek to shelter the domestic economy from the impact of these changes," Zeidman said. "We are confident that the U.S. economy and work force is resilient and capable of responding to these changes such that in the long run economic output and productivity are enhanced."

A similar debate raged in the 1980s and '90s, as employers pulled manufacturing jobs out of the United States and moved them to Mexico, China, the Dominican Republic and other countries where workers were cheap and regulations were loose.

Presidential candidate Ross Perot warned in 1992 of the "giant sucking sound" of jobs that would move to Mexico as a result of the North American Free Trade Agreement.

The pain of those job losses eased with the economic boom of the late '90s. These days, the movement of low-skill jobs is so commonplace it barely sparks an argument.

The latest migration of jobs overseas is more stark because it takes the most desirable positions out of the U.S. economy.

"It's the quality of the jobs," the AFL-CIO's Lee said. "In the past, we were always told that when factories close, that was no big deal. Manufacturing workers were told they should just get some more education."

Now, skilled workers are finding that education isn't enough, not when an Indian worker is just as educated and is willing to do the same job for a fraction of the pay. A microchip designer or financial analyst makes $7,000 a month in the United States. The same worker in India earns $1,000 a month, BusinessWeek reported this year.

Eyeing those sorts of numbers, Ocwen began hiring Indian employees in 2001. They work from Ocwen's facilities in Bangalore and Mumbai (formerly known as Bombay).

Ocwen wouldn't say how much it pays workers in India, but it boasted in a recent regulatory filing that the move has let it add workers while cutting payroll. Ocwen's salary expense fell to $17.7 million in the first quarter of 2003, down from $21.1 million a year ago. Overall, the company lost $8.4 million in the quarter, continuing a pattern of red ink in recent years.

Ocwen sees additional opportunity in its foray into India. The company has set up a new division to offer its employees to U.S. companies that are outsourcing work to India. So far, Ocwen has signed two clients, whose names it won't divulge.

The attraction of cheap labor is so strong that Ocwen and other U.S. companies can overlook India's poor roads and decrepit power grid, not to mention the looming threat of nuclear war between India and Pakistan. In one of its few public pronouncements on its India presence, Ocwen issued a news release last year assuring investors the conflict between India and Pakistan wouldn't affect Ocwen's bottom line.

As jobs move to India, area economic developers can do little more than shrug. While county commissions dangle tax incentives to keep an employer from moving elsewhere in the state or country, little can counter the major wage cuts that come with moving jobs to India.

"It's certainly formidable competition," said Gary Hines, senior vice president for development at the Business Development Board of Palm Beach County. "It's a bottom-line cost decision."

Hines noted that Ocwen once leased three office towers on Palm Beach Lakes Boulevard. As it has moved jobs to Orlando and India, it now occupies only a fraction of that space.

Meanwhile, Florida economic developers might worry whether they'll lose call center jobs -- a linchpin of local economic development -- to India. Thanks to cheap international phone connections, many U.S. call centers have moved to India. Call the 800 number for companies such as Delta Air Lines (nyse:
DAL - news - people ), Dell Computer (nasdaq: DELL - news - people ) and American Express (nyse: AXP - news - people ), and you just might reach a customer service representative in Bangalore or New Delhi.

Last year, Broward County call center The Answer Group said it would cut up to 1,200 jobs in North Lauderdale because Hewlett-Packard (nyse:
HPQ - news - people ) decided to outsource customer support jobs to India. Plantation-based Precision Response Corp., another call-center operator, has expanded to India.

St. Lucie County alone has 4,000-plus call-center jobs, while Applied Card Systems in Boca Raton runs a 1,600-worker call center and payment-processing operation.

Applied Card has no intention of moving jobs to India, a spokesman said. Nor does QVC, the shopping network that runs a 1,000-worker call center in Port St. Lucie, the general manager there said.

Cincinnati-based Convergys (nyse: CVG) has almost 1,000 people working at its Fort Pierce call center. Convergys has several call centers throughout Florida, and it employs 3,000 at one call center in India and plans to hire thousands more in India and the Philippines.

A Convergys spokeswoman wouldn't say whether the company plans to move jobs from the United States to India. But Don Root, executive director of the Economic Development Council of St. Lucie County, acknowledged the Convergys jobs are "probably vulnerable" to a move overseas.

(c) 2003, The Palm Beach Post, Fla. Distributed by Knight Ridder/Tribune Business News.