Judge approves MCI settlement
- By Michael Hardy
- Jul 08, 2003
MCI will pay $500 million in cash and $250 million in stock to settle a $2.25 billion penalty for accounting fraud, a federal judge has ruled.
MCI, formerly called WorldCom Inc., and the Securities and Exchange Commission had agreed to the settlement. MCI will pay the $250 million in stock when it emerges from bankruptcy, which company officials predict will happen this fall.
The company, one of the two original companies to win a place on the General Services Administration's FTS 2001 telecom contract, says it has taken important steps to make sure that the accounting scandals don't recur. The company has a new executive team and a new board of directors.
Jerry Edgerton, senior vice president of MCI Government Markets, had earlier said that the company's problems had no connection to its government division.
In a statement reacting to the court's ruling, chief executive officer Michael Capellas emphasized the company's intent to remain free of future scandals.
"We have made significant strides in rebuilding our company and we believe today's ruling is a positive reflection of the hard work and dedication of MCI's 55,000 employees, the loyalty of our customers and the support of our creditors," he said in a statement issued July 7. "We have committed to being a role model of corporate governance and the significant changes we have already implemented are a testament to that commitment."
The judge's approval of the settlement is a significant step on the road to emergence from bankruptcy, Capellas said.
The company's competitors and critics have repeatedly called for GSA to suspend or debar it from federal contracting. GSA is examining the matter, but GSA general counsel Raymond McKenna has said that any such decision must be based on the company's current conduct, not as punishment for the past.