NU Online News Service, Oct. 15, 10:45 a.m. – A complaint filed by New York State Comptroller H. Carl McCall names Travelers Property Casualty Corp., Hartford, for allegedly making loans totaling $679 million to former WorldCom chief executive officer Bernard J. Ebbers.

The loans allegedly tied Ebbers’ financial interests more closely to those of Travelers Insurance, an operating arm of Citigroup, which, McCall charges, may have influenced Salomon Smith Barney LLP’s ratings of the stock.

McCall, a Democrat who is running for Governor of New York, filed the lawsuit in his capacity as trustee of a state pension fund.

According to the complaint, filed Oct. 11, Travelers–Salomon’s corporate sibling within Citigroup–made the loans to Ebbers just months before WorldCom selected Salomon to be lead underwriter for two bond offerings worth $17 billion.

As a result of the connections between these loans and Ebbers’ WorldCom stock, Citigroup had a $679 million interest in maintaining the price of WorldCom stock through its analyst reports, the complaint charges.

McCall’s complaint says the loans–allegedly used in part to purchase 460,000 acres of land in Alabama, Tennessee and Mississippi–were allegedly backed by Ebbers’ holdings in WorldCom stock, rather than being secured by the real estate purchased with the funds.

Travelers says in a statement that it is one of several insurance companies that participated in a syndicated loan to Joshua Timberland dating back to 1999.

“Travelers Property Casualty’s portion of the loan is approximately $52 million and is part of our more than approximately $33 billion in invested assets,” the company says. “The loan is fully collateralized by timber properties and contracts and is continuing to perform. WorldCom stock is not and was not part of the collateral.”

According to a published report, Citigroup has said three other major insurance companies also took part in the loans to Joshua Timberland. The report identifies the other companies as Metropolitan Life Insurance Co., New York, John Hancock Financial Services Inc., Boston and the Farm Credit System, a government-sponsored entity based in McLean, Va.

John Hancock says in a release responding to the published report that it loaned $200 million to Joshua Timberland as part of an approximately $500 million syndicated loan originated by Travelers Insurance Company.

“Our loan, which is a senior mortgage position, is fully secured by over 400,000 acres of timberland owned by Joshua Timberland,” the company says. “It is not secured by WorldCom stock or any other assets owned by Mr. Ebbers or other individuals or corporations.”

Joshua Timberland is a holding company controlled, in part, by Ebbers, according to John Hancock.

Farm Credit System was not reached in time to comment for publication. A spokeswoman for MetLife says the company has no comment.

McCall said today that new allegations of financial collusion and deception disclosed in the WorldCom class action complaint he filed Friday will strengthen the case of shareholders and bondholders trying to recoup billions of dollars lost as a result of “corporate wrongdoing by the telecommunications giant and its business partners.”

“This web of wrongdoing is astounding and deeply disturbing,” McCall says. “Participants in these schemes appear to lack any ethical compass and are guided only by greed.”

McCall, lead plaintiff in the WorldCom class action lawsuit, on Friday filed the class action complaint in the U.S. District Court for the Southern District of New York. The lawsuit was in response to WorldCom overstating its earnings by more than $7.7 billion from April 1999 through June 2002.

McCall, sole trustee of the New York State Common Retirement Fund, was appointed Aug. 12 by a Manhattan federal district judge to serve as lead plaintiff in the WorldCom securities litigation.

The New York State Common Retirement Fund is responsible for leading the prosecution of civil claims on behalf of all investors who bought WorldCom stocks and bonds over the past several years, the Comptroller’s office says.

The lawsuit alleges that WorldCom engaged in accounting violations that resulted in overstating its income and earnings on its financial statements, thereby artificially inflating the value of its securities.

The retirement fund estimates that it lost more than $300 million as a result of the defendants’ alleged wrongdoing during the period. The fund is represented in the case by the law firms of Barrack, Rodos and Bacine of Philadelphia and Bernstein Litowitz Berger and Grossmann LLP of New York.