Giuliani and WorldCom?

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A report in The Wall Street Journal states that WorldCom investor, David Matlin, has started a fund with former New York Mayor Rudolph Giuliani to accumulate at least one-third of WorldCom's bonds.

Matlin's group of investors could retain the right to appoint board members if it owns more than a third of the company's bonds.

Matlin heads a bond-investor group backed by Credit Suisse First Boston. Sources close to the situation told the Journal that Matlin is expected to urge U.S. Bankruptcy Judge Arthur Gonzalez to accept a reorganization plan under which Giuliani would become chairman.

WorldCom admitted a $9 billion accounting fraud earlier this year and is mired in the biggest bankruptcy in U.S. history.

Michael Capellas was appointed chairman, chief executive and president Nov. 15 after winning the approval of its committee of official creditors. Matlin, believed to be WorldCom's largest creditor, is not a member of the committee and has not expressed complete confidence in the hiring of Capellas.