WorldCom Inc. hopes to persuade a federal judge to approve a $500 million settlement with regulators over its accounting fraud a scandal detailed this week in a report that prompted the resignations of the company’s general counsel and treasurer.
U.S. District Judge Jed Rakoff scheduled a Wednesday afternoon hearing about the company’s proposed settlement with the Securities and Exchange Commission.
Rakoff has invited public comment on the deal, which would settle civil charges relating to the company’s $11 billion accounting fraud. The proposed settlement calls for WorldCom to put $500 million into a fund for investors who were victimized by the company’s fraud, though the exact process has yet to be determined.
The hearing comes a day after WorldCom announced further upheaval in its leadership, with the resignations of its general counsel, Michael H. Salsbury, and treasurer Susan Mayer.
Both were criticized in a report released Monday about the bankrupt company’s former management and lack of oversight.
Michael H. Salsbury was an executive vice president and counsel; Susan Mayer was a senior vice president and treasurer. They submitted their resignations to WorldCom’s board of directors.
Their continued employment could have posed a public relations problem for WorldCom chief executive Michael Capellas, who had said all employees implicated in the company’s financial wrongdoing had been fired or quit.
The report, prepared by former Attorney General Richard Thornburgh for WorldCom’s bankruptcy judge, noted that Salsbury executed changes to a $6 billion acquisition agreement in February 2001 without the board’s knowledge or approval.
In a statement, Salsbury said his resignation was in the company’s best interest to show the public that it is committed to reform.
Mayer was singled out in Thornburgh’s report for her role in loans WorldCom made to former chief executive Bernard J. Ebbers, and for statements regarding $2.65 billion in credit that the company converted to a loan in May 2002.
While WorldCom officials were telling analysts and lenders that its financial condition was sound, and that it had no immediate plans for the money, Mayer conceded to investigators the money was needed to pay lenders.
WorldCom representatives did not return calls late Tuesday.
The company filed the nation’s largest-ever bankruptcy in July 2002 as it collapsed under $41 billion debt and an accounting scandal that has grown to $11 billion.
If approved by U.S. Bankruptcy Judge Arthur Gonzalez, WorldCom plans to take the name of its long-distance service, MCI. It has moved its headquarters from Mississippi to MCI’s base in Ashburn, Va., a Washington suburb.