WorldCom will face trial for securities fraud in March next year, a federal court has ruled, appointing an overseer to make sure the company does not try to destroy evidence.

The case has been brought by the Securities and Exchange Commission, which has accused the firm of covering up a $1.22bn loss by pretending that $3.8bn of expenses was really capital investment.

Breeden: the judge's "eyes and ears"

In the meantime, Richard Breeden, a former SEC chief, will take on the role of watchdog, guarding against any destruction of WorldCom documents by employees.

The court wants to guard against a recurrence of the scandals at bankrupt energy firm Enron - where a mass shredding of documents followed admissions of $600m in overstated profits.

Mr Breeden would be a "hands-on monitor who will report what's going on and... feel free to look into every nook and cranny to fulfil his function", District Judge Jed Rakoff said.

Watchdog

Mr Breeden, whose name was chosen from a list of three agreed by the SEC and WorldCom, is also charged with making sure that executives cannot bleed the company of any more money.

"I'm not there to replace company management," he said.

"I'm there to be the eyes and ears of the court."

He will earn $800 an hour for the role.

However, WorldCom may not survive in its current form until March.

Some of WorldCom creditors are unhappy about a default on bond payments earlier this week, and WorldCom's current chief executive, John Sidgmore, told reporters that he could not rule out the possibility of bankruptcy.

Mismatch

The investigations under way into the WorldCom affair at the SEC and at the Justice Department - examining possible criminal, rather than civil, wrongdoing - mean that hearings planned for Capitol Hill have had to be scaled back.

Cynthia Cooper - the internal auditor who WorldCom said found the hole in its accounts - and audit committee chairman Max Bobbitt have been scratched from the list of witnesses to the Financial Services Committee of the House of Representatives.

Committee chairman Michael Oxley "became concerned that testimony from these two witnesses could potentially compromise other inquiries", a committee spokeswoman said.

WorldCom's account of the affair, which says that Mr Bobbitt took action immediately on hearing Ms Cooper's findings of irregularities, has been challenged by the Wall Street Journal.

According to the newspaper, Ms Cooper is helping the Justice Department after testifying to them that the audit committee delayed taking any action on her report.

She claimed to have found the alleged fraud acting on her own initiative, the newspaper says.

The company claimed the discrepancy was discovered during a routine internal audit.