Sponsored By

Business News - WorldPort Closes U.S. Headquarters; Suit Filed in Federal Court

Channel Partners

October 1, 1999

3 Min Read
Business News - WorldPort Closes U.S. Headquarters; Suit Filed in Federal Court

Posted: 10/1999

WorldPort Closes U.S. Headquarters; Suit Filed
in Federal Court
By Ken Branson

Anyone looking for rock bottom, in business terms, might ask the employees and
stockholders of WorldPort Communications Inc., Kennesaw, Ga. Their office has been closed,
the company has been delisted from NASDAQ, their stock price closed recently at 71 cents
per share, and what looks like half the lawyers in the world are suing WorldPort and two
former executives for misleading investors.

At press time, no company spokesperson or executive has returned phone calls or e-mail
messages. Attempts to reach Paul A. Moore and Philip S. Magiera, the former CEO and chief
financial officer, respectively, have been unsuccessful.

The story of the company’s last tumultuous year is sketched in a class-action lawsuit
filed in the U.S. District Court in Atlanta for Marie Domosiaris "and all others
similarly situated" by the Philadelphia law firm of Berger & Montague P.C.
Domosiaris is unidentified apart from her name and the sworn assertion that on June 25,
she bought 2,500 shares of WorldPort common stock at $9.50 and 1,000 shares at $9.4375,
paying a total of $33,187.50. Domosiaris also says she sold the shares in two blocks on
June 28: 1,000 shares at $4.0626, and then 2,500 shares at $4, receiving $14,062.60.
Domosiaris therefore was out $19,124.90, and wants WorldPort, Moore and Magiera to give
her that much and then some.

Class-action suits usually are consolidated by the federal courts into one case with a
lead plaintiff and law firm.

According to the complaint, WorldPort went astray at the end of 1998, when it agreed to
accept equity funding from The Heico Companies LLC, Chicago.

In December, WorldPort sold 12,318,134 shares of common stock to Heico for $40 million,
plus an option to buy another 3 million shares for $10 million.

WorldPort, according to documents filed with the U.S. Securities and Exchange
Commission (SEC), already had borrowed $120 million from a consortium of investors
(unnamed in the documents) in the spring of 1998. In June, WorldPort then spent $109
million ($92 million in cash and $17 million in assumed debt) to buy EnterTel B.V., a
Dutch carrier, as the keystone of a projected pan-European network.

WorldPort announced the Heico investment in a Jan. 4 press release. The stock price
went from $9.6875 on December 31 to $10.55 on Jan. 4–because of the announcement, the
complaint alleges. "This press release was materially misleading, because it failed
to disclose several material facts regarding the transaction," the complaint alleges.

Specifically, the agreement called for WorldPort to issue a new class of
"super-voting" shares of stock to Heico, to expand the number of directors and
to appoint four directors nominated by Heico who would have what amounted to veto power
over all major decisions. These provisions violate NASDAQ rules calling for the
shareholders to vote on such changes, and no shareholder vote was held. The complaint
alleges that Moore and Magiera, and therefore the company, knew this to be true but
deliberately withheld it from the investing public.

Heico, controlled by Michael E. Heisley Sr., is an investment company with a wide range
of industrial interests. WorldPort was its first foray into communications services.
Heisley cannot be reached for comment, and the documents on file with the SEC don’t make
clear whether his company was part of the consortium of investors backing the purchase of
EnterTel. However, the documents do say that Heico made the equity investment to help
WorldPort pay "certain obligations." In addition, according to the documents,
WorldPort agreed to remove its then-CEO Paul Moore and Chief Financial Officer Philip
Magiera, from its board in January.

The complaint also alleges that Moore and Magiera knew that NASDAQ was investigating
the transaction on April 20, but witheld the information until June 28, four days after a
hearing was held on the matter by NASDAQ. The stock sank to $3.50 and has been in free
fall ever since.

Read more about:

Free Newsletters for the Channel
Register for Your Free Newsletter Now

You May Also Like