$750 Million MCI/WorldCom Settlement is Largest in SEC HistoryJul 8, 2003 | www.accountingweb.com
A federal judge in Manhattan has given a green light to a settlement between telecommunication giant MCI, formerly WorldCom, and the Securities and Exchange Commission. The settlement represents a resolution to the largest ever corporate bankruptcy in U.S. history.
MCI/WorldCom has agreed to pay $750 million, half again as much as the $500 million that had been tentatively agreed upon earlier this year. The fine is the largest ever imposed by the SEC, 75 times larger that the previous record holder, a $10 million fine against Xerox Corporation relating to a charge of accounting irregularities.
U.S. District Court Judge Jed Rakoff commended MCI/WorldCom for its recovery efforts. "The Court is aware of no large company accused of fraud that has so rapidly and so completely divorced itself from the misdeeds of the immediate past and undertaken such extraordinary steps to prevent such misdeeds in the future," he said in his decision.
As part of its settlement with the SEC, MCI/WorldCom has agreed not to violate any securities laws in the future, to provide appropriate training to its executives so as to minimize the possibility of securities violations occurring, to retain a consultant who would review the internal controls and policies at MCI, and to allow a Corporate Monitor to review the adequacy and effectiveness of MCI corporate governance and ethics policies.
Former Big Five accounting firm Andersen was MCI/WorldCom's auditor during the time of its accounting irregularities. Earlier this summer MCI/WorldCom got the go-ahead to proceed with a class action lawsuit against Andersen, claiming that Andersen failed to properly review and investigate the events that led to the massive accounting fraud.
The settlement is not the only fine pending against MCI/WorldCom. Several civil suits and class action suits have been filed by creditors, shareholders, and employees of the embattled company.