The US Attorney in WorldCom's home state of Mississippi had been due to probe allegations of fraud at the firm, which recently admitted $3.8bn (£2.5bn) in accounting irregularities.

But Dunn Lampton, who heads the US attorney's office in Jackson, Mississippi, owned WorldCom stock, leading to his removal from handling the case.

WorldCom is being sued in New York by the Securities and Exchange Commission, which alleges that the irregularities were a prolonged and concerted fraud on the part of senior management.

The shift in jurisdiction could allow matters to proceed more quickly, the US Department of Justice hopes.

SWAT team talk

The need for speed in the WorldCom investigation has been sparked by a speech earlier this week from President George W Bush, in which he called for tougher penalties against corporate lawbreakers.

He ordered the creation of a Justice Department task force, which he described as a "financial crimes SWAT team" to run investigations into corporate malpractice.

The US attorney's office in Manhattan is part of that task force.

Conflicts of interest often arise when local officials are asked to investigate companies in their district.

A similar removal occured in recent investigations into failed energy firm Enron, and Attorney General John Ashcroft removed himself from the probe because he had once received campaign contributions from the company.