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WorldCom, SEC Expected to Sumbit Partial Settlement to Judge

Nov 26, 2002 | Wall Street Journal

Lawyers for the Securities and Exchange Commission are expected to appear in Manhattan federal court Tuesday to present a partial settlement of civil fraud charges against WorldCom Inc., a person familiar with the matter said.

The hearing is scheduled for 4:30 p.m. in front of U.S. District Judge Jed S. Rakoff. Details of the accord weren't available.

WorldCom, which is operating under bankruptcy-court protection, has said it inflated profit by at least $9 billion during the past three years.

On Nov. 5, WorldCom said in a prepared statement that "in settlement discussions with the Securities and Exchange Commission, WorldCom advised the agency that, based on very preliminary reviews of past accounting, it expects an additional restatement of earnings which, when added to WorldCom's past restatements, could total in excess of $9 billion."

The Wall Street Journal had reported two months ago that WorldCom could add as much as $2 billion to the $7.2 billion in improperly booked earnings before interest, taxes, depreciation and amortization the company disclosed during the summer.

The Journal reported earlier on Nov. 5 that WorldCom was in talks with the SEC to settle SEC fraud charges against the company amid rapid developments in the case, according to people familiar with the talks.

The Journal further reported that broad outlines of an SEC settlement, hammered out a week earlier, in the massive accounting-fraud case would include a court injunction barring WorldCom from violating securities law.

The SEC is also expected to settle charges against several individuals. The individuals' names aren't known, but people close to the situation told the Journal at the time that they are low- to mid-level executives who wouldn't be subject to charges by federal prosecutors who are also conducting an investigation. Some of those people have already worked out or are working out plea agreements.

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