Satellite Radio IPO Carries a Disclosure

It "was not money that inspired the creation of the WorldSpace system. It was need," Samara said in congressional testimony on Africa in 2001, citing especially the spread of AIDS. "The sooner we infuse Africa with information, the sooner it will develop the means to generate greater income, heal its sick, educate its populace and govern with fairness and compassion," he said.

One challenge Samara faced was getting his radios distributed among impoverished populations. WorldSpace began offering free service in Africa in 2000. In an evolution of Samara's plan, it is now concentrating on affluent urban populations in India, with ambitions to penetrate China and Western Europe.

In its public offering statement, WorldSpace identified potential risks and obstacles. It said its auditors "have identified material weaknesses and significant deficiencies in our internal controls, and if we are unable to develop, implement and maintain appropriate controls we will not be able to comply with applicable regulatory requirements imposed on reporting companies."

"We have experienced severe working capital constraints for several years and, as a result, we have operated with very limited staffing of key functions, including accounting," it said. The firm's finances improved in December, when institutional investors put up $155 million.

WorldSpace launched a satellite serving Africa in 1998 and another serving Asia in 2000. The satellites are designed to operate for 12 years, the prospectus said. Much of the ground-based infrastructure that would enable the company to introduce mobile service has not yet been built, the filing said.

The money men who nurtured WorldSpace with investments of more than $1 billion over the years include Idris and Bin Mahfouz. Idris has stated that the U.S. government made "a grave error" in bombing his factory in Sudan, and he succeeded in getting the Treasury Department to release $24 million of his assets that it had frozen. The intelligence that prompted the strike on his factory has been disputed.

The Federal Reserve Board in 1992 charged Bin Mahfouz with helping BCCI conceal its ownership and financial condition. He denied the allegations and agreed to pay hundreds of millions of dollars with other parties to settle various claims. In litigation over the terrorist attacks of Sept. 11, 2001, families of victims have alleged Bin Mahfouz was "a major financial sponsor" of bin Laden and his terrorist network. A lawyer for Bin Mahfouz has written that his client "has never supported or had any relationship whatsoever with Osama bin Laden or terrorism of any kind."

The company says the Saudis no longer have "any direct debt or equity." However, Idris holds a majority stake in a Singapore company that holds 17.4 million shares, WorldSpace said in an SEC document. The Singapore company is controlled by Samara. Two sons of Bin Mahfouz control a Cayman Islands company that is entitled to 10 percent of WorldSpace's earnings before taxes and other charges under a royalty agreement, a WorldSpace filing said.

Samara's direct and shared stock holdings give him control of WorldSpace, including the election of board members, the company reported, and WorldSpace has reserved 5 percent of its satellite capacity for a nonprofit organization he chairs.

In December, Samara repaid a debt of $1.6 million to WorldSpace, the prospectus said.

Samara held stock options, exercisable within 60 days, that would have been worth $104.4 million at an estimated offering price of $20 -- less than the actual offering price of $21, the company reported. He also held shares of restricted stock, which were to vest in 180 days, worth $13.2 million at yesterday's close, the SEC filing said.

Altogether, Samara controlled or shared control before the IPO of 28.7 million shares, worth $641 million at yesterday's close. The company did not say how much of that he personally owns.

Staff researchers Richard Drezen and Julie Tate contributed to this report.