Plaintiff, for his class action complaint (the "Complaint"), alleges upon personal knowledge the allegations that pertain to the named plaintiff, his counsel and his own acts, including his suitability to serve as a class representative, and alleges upon information and belief all other matters that are within the exclusive custody and control of defendants. Plaintiff's information and belief is based upon, among other things, the investigation made by plaintiff by and through his attorneys, which investigation included analyses of publicly available news articles, press releases, filings made by defendant MCI Communications, Corp. ("MCI" or the "Company") with the Securities and Exchange Commission ("SEC"), and other matters of public record.

1. (a) The claims alleged herein arise under Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. Section 78(j)(b) and 78(t), and Rule 10b-5 promulgated thereunder by the SEC, 17 C.F.R. 240.10b-5.

(b) Jurisdiction over the subject matter of this action is conferred upon this Court by Section 27 of the Exchange Act, 15 U.S.C. Section 78aa, and 28 U.S.C. Section 1331.

(c) This Court has personal jurisdiction over the defendants pursuant to Section 27 of the Exchange Act, 15 U.S.C. Section 78aa.

(d) Venue is proper in this District pursuant to Section 27 of the Exchange Act and 28 U.S.C. Section 1391(b). Many of the acts and transactions constituting the violations of law complained of herein occurred in this District.

(e) In connection with the acts alleged herein, the defendants, directly or indirectly, used the means and instrumentalities of interstate commerce, including the United States mails and facilities of a national securities exchange.

2. As explained in detail below, defendant MCI and BT Telecommunications PLC ("BT") entered into a merger agreement in November 1996 whereby BT would acquire all of the outstanding shares of MCI in exchange for cash and stock valued at approximately $24 billion (the "Merger"). The Merger faced serious regulatory hurdles from the start that had to be cleared before the Merger could be consummated. During the time these approvals were being sought, MCI surprised the investment community and, apparently, BT when it announced in July 1997, that it would suffer an $800 million loss for the year.

3. Unbeknownst to the public, BT and MCI thereafter began renegotiating the terms of the Merger as BT and its stockholders now felt they were overpaying for MCI. MCI kept silent, however, regarding the negotiations, even saying at one point during July that the deal was going "straight ahead." On August 14, 1997, in the Company's Form 10-Q Report for the quarter ended June 30, 1997, defendants brazenly, and misleadingly, announced that the Merger was set to close in the Fall of 1997. Defendants never mentioned the renegotiations with BT. Just one week later, on August 21, 1997, MCI was forced to acknowledge that the Merger had been renegotiated and shortly thereafter it announced that its shareholders would receive 22% less than under the Merger agreement as originally structured. The price of MCI stock plummeted on this announcement. Plaintiffs and the Class lost tens of millions of dollars as a result.

4. Plaintiff Maurice Teitelbaum purchased 1300 shares of MCI common stock on August 19, 1997, at $34-1/2 per share, and has been damaged thereby.

5. Defendant MCI is a Delaware corporation with executive offices at 1801 Pennsylvania Avenue, N.W., Washington, D.C. 20006. MCI provides long distance, local and wireless telecommunications services for both voice and transmission of data, provides switched and dedicated internet access services, and performs call center, consulting and systems integration services.

6. BT is a corporation under the laws of the United Kingdom. BT agreed to acquire a 20% stake in MCI in June 1993 for approximately $4.3 billion. In connection therewith, BT acquired among other things, a right of first refusal on any acquisition of MCI for a seven-year period.

7. (a) Defendant Gerald H. Taylor ("Taylor") is and was, at all times relevant to this Complaint, Chief Executive Officer ("CEO") of defendant MCI.

(b) Defendant Taylor, as a function of his responsibilities as CEO of defendant MCI, was responsible for all aspects of MCI's business and was ultimately responsible for all of the Company's public statements during the Class Period defined below. In addition, all areas of MCI's business segments reported ultimately to defendant Taylor.

(c) As a result of these responsibilities, defendant Taylor knew or should have known, but for his reckless disregard of the truth, that MCI's public statements which he made or for which he had responsibility to monitor, and MCI's public reports for which he had responsibility to supply data and information and to determine the final presentation, were false as more fully alleged herein. As a result of providing false information and failing to correct the false and misleading statements contained in MCI's publicly disseminated reports and statements during the Class Period, which he knew, or should have known, but for his reckless disregard of the truth, were false and misleading, defendant Taylor caused the Company to misrepresent the terms of the Merger with BT to the investing public and thereby caused the inflation of the market price of MCI common stock throughout the Class Period.

8. (a) Defendant Timothy F. Price ("Price") is and was, at all times relevant to this Complaint, President and Chief Operating Officer ("COO") of defendant MCI.

(b) As President and COO of MCI, defendant Price was responsible for all aspects of MCI's business and was ultimately responsible for all of the Company's public statements during the Class Period. In addition, all areas of MCI's business segments reported ultimately to defendant Price.

(c) Defendant Price, therefore, knew or should have known, but for his reckless disregard of the truth, that MCI's public statements which he made or for which he had responsibility to monitor and MCI's public reports for which he had responsibility to supply data and information and to determine the final presentation, were false and misleading, as more fully alleged herein. As a result of providing false information and failing to correct the false statements contained in MCI's publicly disseminated reports and statements during the Class Period, which he knew, or should have known, but for his reckless disregard of the truth, were false and misleading, defendant Price caused the Company to misrepresent the terms of the Merger with BT to the investing public and thereby caused the inflation of the market price of MCI common stock throughout the Class Period.

9. (a) Defendant Douglas L. Maine ("Maine") is and was, at all times relevant to this Complaint, Executive Vice President and Chief Financial Officer ("CFO") of defendant MCI.

(b) As Executive Vice President and CFO of defendant MCI defendant Maine was responsible for providing information for inclusion in MCI's press releases, reports to shareholders and Form 10-Qs and 10-Ks filed with the SEC. As a function of his responsibilities as an executive officer, defendant Maine was privy to reports from all areas of MCI's business segments. Therefore, defendant Maine knew or should have known, but for his reckless disregard of the truth, that MCI's public statements and MCI's public reports for which he had responsibility were false and misleading as more fully alleged herein. As a result of failing to correct the false and misleading statements contained in MCI's publicly disseminated reports and statements during the Class Period, which he knew, or should have known, but for his reckless disregard of the truth, were false and misleading, defendant Maine caused the Company to misrepresent the terms of the Merger with BT to the investing public, and thereby caused the inflation of the market price of MCI common stock throughout the Class Period.

10. Defendants Taylor, Price and Maine (the "Individual Defendants"), as the senior operating executive officers of MCI, had day-to-day responsibilities for managing and supervising the operations of MCI. As officers, directors and/or controlling persons of a company that is, and at all relevant times was, registered with the SEC under the federal securities laws, the Individual Defendants had a duty to disseminate complete, accurate and truthful information with respect to the Company's operations, to correct any previously issued statements that had become materially misleading or untrue and to disclose any trends that would materially affect the present and future financial results of MCI, so that the market price of the Company's publicly traded securities would be based upon truthful and accurate information. Under rules and regulations promulgated by the SEC under the Exchange Act, specifically Item 303 of Regulation S-K, the Individual Defendants also had a duty to report all trends, demands or uncertainties that were reasonably likely to impact (i) MCI's liquidity; (ii) MCI's revenues and/or income; and/or (iii) previously reported financial information such that it would not be indicative of future operating results. The Individual Defendants' statements and omissions during the Class Period violated these specific requirements and obligations, among others.

The Individual Defendants
Were Control Persons Of MCI

11. By reason of their financial interests, their business relationships and their status as officers and/or directors of MCI, the Individual Defendants were, at all relevant times, "controlling persons" of MCI within the meaning of Section 20(a) of the Exchange Act and had the power and influence (which they exercised) to cause MCI to engage in the unlawful conduct complained of herein. Because of their positions of control, the Individual Defendants were able to and did, directly and/or indirectly, control the conduct of MCI's business, and the information about its business contained in its public statements, including its filings with the SEC. Throughout the Class Period, the Individual Defendants were provided with copies of, reviewed and approved, and/or signed press releases and other reports prior to or shortly after their issuance and had the ability and opportunity to prevent their issuance or to cause them to be corrected. As a result, each of these defendants was responsible for the accuracy of the public reports, releases and statements detailed herein as "group published" information and are therefore responsible and liable for the representations contained therein.

12. Each of the defendants knew and/or recklessly disregarded that each of the statements for which such defendants are sued was materially false and misleading and/or had been issued without a reasonable basis.

13. As direct participants in the wrongs complained of herein, each of the Individual Defendants is jointly and severally liable for the damages suffered by plaintiff and other purchasers of MCI common stock during the Class Period for the violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder.

14. Plaintiff brings this action as a class action pursuant to Rules 23(a) and 23(b)(3) of the Federal Rules of Civil Procedure ("Fed. R. Civ. P."), on behalf of himself and a class of all persons and entities who purchased MCI stock on the open market during the period August 14, 1997, through August 20, 1997, inclusive (the "Class Period"), and who were damaged thereby (the "Class"). Excluded from the Class are defendants herein, the officers and directors of the Company and its affiliates and subsidiaries, the affiliates and subsidiaries of MCI, members of the immediate families of the Individual Defendants, any entity in which any excluded person has a controlling interest, and the legal representatives, heirs, successors and assigns of any excluded person.

15. The members of the Class are so numerous that joinder of all members is impracticable. While the exact number of Class members is unknown to plaintiff at the present time and can only be ascertained from books and records maintained by MCI and/or its agent(s), plaintiff believes that there are, at a minimum, thousands of members of the Class located throughout the United States. As of March 31, 1997, there were more than 687 million shares of MCI common stock outstanding held by more than 47,000 shareholders of record. Throughout the Class Period, MCI common stock was actively traded on NASDAQ, an efficient market.

16. There are numerous questions of law and fact which are common to the Class, and which predominate over any questions affecting only individual members of the Class, including:

(a) whether the federal securities laws were violated by defendants' acts as alleged herein;

(b) whether reports, press releases and other documents and statements disseminated to the public or filed with the SEC by MCI and the Individual Defendants during the Class Period misrepresented the terms of the Merger;

(c) whether defendants participated in and pursued the common course of conduct complained of herein;

(d) whether defendants acted willfully or recklessly in misrepresenting material facts;

(e) whether the market price of MCI common stock was manipulated during the Class Period and/or artificially inflated due to the misrepresentations of material facts complained of herein; and

(f) whether plaintiff and other Class members have sustained damages and, if so, the appropriate measure of damages.

17. Plaintiff's claims are typical of the claims of all Class members, and plaintiff does not have interests antagonistic to, or in conflict with, those of the Class he seeks to represent.

18. Plaintiff will fairly and adequately protect the interests of the members of the Class and has retained competent counsel experienced in class action litigation under the federal securities laws.

19. A class action is superior to other available methods for the fair and efficient adjudication of this controversy since the members of the Class are so numerous and their residences so geographically dispersed that joinder of all members is impracticable. Moreover, since the damages suffered by individual Class members may be relatively small, the expense and burden of individual litigation make it virtually impossible for the Class members individually to seek redress for the wrongful conduct alleged herein.

20. Plaintiff will rely, in part, upon the presumption of reliance established by the fraud-on-the-market doctrine in that, among other things:

(a) defendants made public misrepresentations during the Class Period;

(b) the misrepresentations were material;

(c) plaintiff and the other members of the Class purchased MCI common stock during the time the defendants misrepresented material facts and before the time the true facts were disclosed, without knowledge of the misrepresented facts; and

(d) the common stock of the Company traded in an efficient market.

21. Based upon the foregoing, plaintiff and the other members of the Class are entitled to a presumption of reliance upon the integrity of the market for, at least, the purpose of class certification, as well as for ultimate proof of the claims on their merits.

22. The names and addresses of the record owners of the shares of MCI common stock purchased during the Class Period are available from MCI and/or its transfer agent(s). Notice can be provided to purchasers of MCI common stock by a combination of publication and first class mail using techniques and forms of notice similar to those customarily used in class actions arising under the federal securities laws.

23. The Exchange Act's safe harbor provision for forward-looking statements under certain circumstances does not apply to any of the statements alleged to be false and misleading in this Complaint. The statements complained of herein were not forward-looking as defined by the Exchange Act. To the extent that any of the statements alleged herein are deemed forward-looking, none of those statements were accompanied by meaningful cautionary statements specifically identifying factors that could cause actual results to differ materially from those in the forward-looking statements. Alternatively, to the extent that the statutory safe harbor does apply to any forward-looking statements pleaded herein, defendants are liable for those false forward-looking statements because, at the time each of those forward-looking statements was made, the speaker knew that the forward-looking statement was false and that the forward-looking statement was authorized and/or approved by an executive officer or director of MCI who knew that those statements were false when made.

24. In June 1996, MCI and BT announced that they would combine their internet networks to set up what they said would be the world's largest internet provider, Concert InternetPlus.

25. On November 1, 1996, it was reported that MCI and BT were in discussions regarding an acquisition of MCI by BT. In response, MCI issued a press release stating that its Board of Directors was considering a possible strategic merger with BT and that deliberations would be concluded over the ensuing weekend. MCI stated that there could be no assurance that any agreement would be entered into or that any transaction would be consummated.

26. On November 4, 1996, MCI and BT announced that they agreed for BT to acquire MCI in exchange for BT stock and cash. Under the terms of the Merger, BT would acquire the MCI shares it does not already own in exchange for 0.54 of a BT American depository share (or 5.4 BT shares) plus $6 cash per MCI share. Based upon the November 1, 1996 closing price of BT's depository shares, $55.50, the transaction was valued at $36 per MCI share. The Merger also provided that members of MCI top management were to continue with the surviving entity.

27. On or about July 10, 1997, MCI shocked the market when it announced that it would lose more than $800 million this year in its local phone business and even more next year. The Company stated that because of delays by the Baby Bells, overall profits could decline in 1998 from 1997.

28. Almost immediately on the heels of this news, the market began to raise concerns about how the impending loss could affect the Merger. According to a July 10, 1997 Bloomberg news story, securities analysts following MCI did not initially expect the MCI forecasts to derail the acquisition. "This deal is too compelling. This is just window dressing going in," said arbitrager Peter Schoenfeld, chief executive of investment advisers PSAM LLC. Similarly, according to a July 11, 1997 Bloomberg story, analyst Laura Winchester of BZW Services Ltd. said that BT would be unlikely to withdraw because the "logic of building a global alliance is 'too compelling.'"

29. During the next month, while securities analysts and the market debated the likelihood of BT either pulling out of or amending its offer, BT and MCI officials largely refused to comment on the possibility of a renegotiation. However, on July 15, 1997, defendant Price, in response to rumors that BT was seeking to oust him as President of MCI stated in a Bloomberg Forum interview that "I'm going to be running MCI for a long time." He added that local phone market entry costs would not hurt the combination of the companies, stating, "I don't think it will have an impact in that both of us realize the local market is a huge opportunity for the combined entity." In response to questions regarding whether earnings projections would delay the closing of the acquisition, defendant Price stated that "from MCI's perspective it is straight ahead."

30. On July 28, 1997, FCC Chairman Reed Hundt stated that his agency was set to approve the merger. According to Bloomberg, MCI spokeswoman Janice DePeau said that Hundt's comments signal "another step forward in obtaining approvals for the merger." She would not comment however when asked about the market speculation that terms of the deal would be renegotiated.

31. During the next two weeks Company representatives continued to issue "no comment" regarding the possibility of renegotiation. However, on August 14, 1997, the Company filed with the SEC its Form 10-Q report for the quarter ended June 30, 1997. In a section of that report entitled "Merger Agreement with British Telecommunications PLC," defendants assured the investing public that the Merger would proceed as scheduled to close in the Fall of 1997:

The Merger was approved by the stockholders of the company and BT in April 1997 and the European Commission on May 14, 1997. On July 7, 1997, the United States (U.S.) Department of Justice (DOJ) moved to modify the existing consent decree with the company that was entered in September 1994. The company and BT have agreed to the amendments to this consent decree. Completion of the Merger which is subject to approval by the U.S. Federal Communications Commission (FCC) is expected by the Fall 1997.

(Emphasis added.)

32. The Company later repeated this representation in the "Management's Discussion" section of the 10-Q Report. Defendants added that:

The company believes that Concert, operating with the combined networks, financial resources, management, personnel and technical expertise of the company and BT, will be better able to capitalize on growth opportunities in the telecommunications industry, both domestically and internationally. In addition, the Company expects Concert will be able to derive significant advantage from the more efficient utilization of their combined assets, management and personnel. Under the terms of the Merger Agreement, the company and BT will continue to sell and service customers using their own brand names in their respective home countries.

(Emphasis added.)

33. These statements were false and misleading. By this time, Company representatives, including at least defendants Taylor and Price had been renegotiating the price that BT would pay to consummate the Merger. Defendants' failure to provide this information to the investing public rendered the statements in the 10-Q Report materially misleading. In addition, although the risk factors section of the 10-Q Report stated that "a significant delay in the expected closing of the Merger" could affect results, defendants never warned of the risk of renegotiation.

34. Just seven days later, on August 21, 1997, it was announced that the parties had renegotiated the terms of the deal reducing the price to be paid by BT. Shortly thereafter it was announced that the price to be paid by BT had been reduced by approximately 22% from the originally announced Merger price. In addition, the deal was restructured so that shareholders would receive less stock in the newly formed company.

35. Based on these revelations, the stock price of MCI, which had climbed to $36-11/16 per share on August 20, 1997, after the dissemination of the 10-Q Report, fell to $30-9/16 per share on August 21, 1997. Plaintiff and the Class lost tens of millions of dollars.

36. Plaintiff repeats and realleges paragraphs 1 through 35 as if fully set forth herein.

37. Throughout the Class Period, the Individual Defendants and MCI individually and in concert, directly and indirectly, by the use and means of instrumentalities of interstate commerce and/or the mails, engaged and participated in a continuous course of conduct to conceal adverse material information about the financial condition of MCI as specified herein. Defendants employed devices, schemes and artifices to defraud, while in possession of material adverse non-public information and engaged in acts, practices, and a course of fraudulent conduct as alleged herein. Their conduct included the making of, or the participation in the making of, untrue statements of material facts and omitting to state material facts necessary in order to make the statements made about MCI and the Merger, in light of the circumstances under which they were made, not misleading, as set forth more particularly herein, and engaged in transactions, practices and courses of business which operated as a fraud and deceit upon the purchasers of MCI stock during the Class Period.

38. The materiality of defendants' misstatements is evidenced by, inter alia, the drop in the price of MCI common stock once the truth about the Merger was revealed.

39. The Individual Defendants, as officers and/or directors of MCI, are liable as direct participants in the wrongs complained of herein. The Individual Defendants were able to and did control, directly or indirectly, the content of the public statements disseminated by MCI. With knowledge of the falsity of the statements contained therein or in reckless disregard of the truth, the Individual Defendants caused the false statements to be issued.

40. As a result of the deceptive practices and misleading statements, the market price of MCI common stock was artificially maintained and/or inflated throughout the Class Period. In ignorance of the false and misleading nature of the representations described above, and the manipulative devices employed by defendants, plaintiff and other members of the Class, in reliance on either the integrity of the market or directly on the statements and reports of defendants, purchased MCI common stock at artificially inflated prices.

41. Had plaintiff and other members of the Class known of the materially adverse information not disclosed by the Individual Defendants and MCI, they would not have purchased MCI common stock at all or, at least, not at artificially inflated prices. Plaintiff and the other members of the Class have been damaged by the conduct of defendants.

42. By virtue of the foregoing, defendants have violated Section 10(b) of the Exchange Act, and SEC Rule 10b-5 promulgated thereunder.

43. Plaintiff repeats and realleges paragraphs 1 through 42 as if fully set forth herein.

44. By virtue of their positions with MCI, the Individual Defendants had the power, and exercised the same, to cause MCI to engage in the wrongful acts described herein. As a result, the Individual Defendants are liable as controlling persons of MCI, pursuant to Section 20(a) of the Exchange Act.

45. Plaintiff and other members of the Class have been damaged by the violations of the Individual Defendants as described in this Count and seek recovery for the damages caused thereby.

WHEREFORE, plaintiff, on behalf of himself and the plaintiff Class, prays for judgment as follows:

A. Declaring this action to be a proper Class Action on behalf of the Class maintainable pursuant to Fed. R. Civ. P. 23(b)(3);

B. Declaring plaintiff to be a proper Class representative and appointing plaintiff's counsel to represent the Class;

C. Awarding monetary damages against all defendants for all losses and damages suffered as a result of the acts and transactions complained of herein in violation of Sections 10(b) and 20(a) of the Exchange Act;

D. Awarding plaintiff and other members of the Class their costs and expenses in conducting this litigation, including reasonable attorney's fees, expert fees and other costs and disbursements; and

E. Granting such other and further relief as the Court may deem just and proper.

Plaintiff demands a trial by jury of all issues so triable.

Source: File emailed to epost from Cohen, Milstein, Hausfeld & Toll, P.L.L.C.