The New York Democrat, a senior member of the Senate Banking Committee that oversees the SEC, told The Buffalo News that he voiced his concerns with Donaldson in a telephone call and also wrote him an angry letter.

The record $9 billion WorldCom bankruptcy, Schumer said, is Donaldson's first test of where it plans to take the SEC on fraud enforcement.

"It has come to my attention," Schumer wrote Donaldson, that the agency is poised to settle with WorldCom on a "small civil fine."

Schumer declined to disclose the source of his information.

Schumer told Donaldson that losses by the state and local pension systems in New York reach $600 million as a result of the WorldCom debacle, making it one of the nation's "worst . . . corporate scandals."

"The SEC must dole out swift, severe punishment in response to corporate wrongdoing," he said.

"Leniency from the SEC and other federal enforcement officials in the fact of this type of pervasive conduct will not provide the strong message necessary to deter future corporate fraud," the senator wrote Donaldson.

Schumer said Donaldson, a native of Buffalo, has not responded to his April 9 letter. All Donaldson said in their telephone conversation, Schumer said, was that he would give the senator's concerns "serious consideration."

Schumer quoted a report by former Attorney General Richard Thornburg, a court-appointed examiner in the WorldCom bankruptcy as saying the company's behavior was "a concerted program of manipulation and gave rise to a smorgasbord of fraudulent journal entries and adjustments . . ."

In Orlando, Fla., lawyers for stockholders protested that that WorldCom's Chapter 11 plan allows reduction of the company's pre- bankruptcy debt of $41 billion to $4.5 billion. The firm of Hooper & Weiss said the settlement will pay bondholders 36 cents on the dollar but nothing for holders of existing common stock.

A new class of common stock will be issued to creditors with the existing stockholders getting nothing.

The settlement, according to Robert H. Weiss, will pay the promoters of the stock sales their fees. "Who is speaking here for the small investors?" he asked.

State Attorney General Eliot Spitzer declined to comment on Schumer's letter. An aide, Brad Maione, noted that on Sept. 30, Spitzer sued WorldCom former chief executive officer Bernard J. Ebbers for disgorgement of profits they made from initial public officings and stock options.

Ebbers, Spitzer said, made more than $11 million on the deals. During the same period, the Salomon Smith Barney brokerage generated $107 million in fees on the WorldCom offerings.

-- Douglas Turner, News Washington Bureau Chief; News Albany Bureau Chief Tom Precious contributed to this report.