Advertisement

Our coronavirus coverage is free for the first 24 hours. Find the latest information at tampabay.com/coronavirus. Please consider subscribing or donating.

  1. Archive

Judge accepts WorldCom's $750-million settlement

A federal judge agreed Monday to a settlement fining WorldCom $750-million for its $11-billion accounting scandal, saying tougher measures might harm the giant telecommunications company's employees and quash hopes for investors.

In approving the agreement with the Securities and Exchange Commission, U.S. District Judge Jed Rakoff of New York said he did not want to drive the beleaguered company out of business.

Rakoff said killing the company "would unfairly penalize its 50,000 employees, remove a major competitor from a market that involves significant barriers to entry and set at naught the company's extraordinary efforts to become a model corporate citizen."

"This is not to say the sins of the past can be forgotten or wholly forgiven," Rakoff wrote in a 14-page decision. "Those frauds were still colossal and must be punished."

"A further consequence" of a moderate settlement, Rakoff wrote, "would be to give the victim shareholders the opportunity to participate, albeit modestly, in any increase in the company's value following its emergence from bankruptcy."

The company's corporate accounting fraud was exposed last year as part of a wave of business scandals that rocked Wall Street.

Both sides had initially proposed a $500-million settlement in May but agreed to increase that offer with $250-million worth of stock in the new incarnation of the telecommunications company, now operating as MCI.

If the company does not make it out of bankruptcy proceedings, the penalty would remain $500-million.

CEO Michael Capellas said the effort to emerge from bankruptcy "remains on track for later this fall." He promised that the company is committed "to being a role model of corporate governance."

Bankruptcy lawyer Ben Seigel said the stock proposal offers investors "hope _ it might be an unrealistic hope" _ of recouping at least some of their losses.

Seigel said issuing new stock to disgruntled shareholders "has become a very, very popular vehicle to resolve cases ... The stock may not be worth anything, but it may become worth something."

Up next:BRIEFLY

YOU MIGHT ALSO LIKE

Advertisement
Advertisement