A Federal court judge in New York has approved $750 million settlement between the scandal-ridden WorldCom corporation and federal regulators.
MCI, as WorldCom will soon be called, initially reached an agreement with the Securities and Exchange Commission to settle accounting fraud charges by paying a fine of a $500 million. But victims of the fraud and competitors complained that the company would emerge too easily from the bankruptcy it filed one year ago.
The company is accused of using false balance sheets to hide expenses and inflate earnings. Experts estimate WorldCom, once a telecommunications giant, improperly recorded about $11 billion in expenses.
Last week the company boosted its settlement offer to $750 million, an amount which federal judge Jed Rakoff called "fair and reasonable" in his 14-page decision. The judge added that the settlement is "as good an outcome as anyone could reasonably expect in these difficult circumstances."
Judge Rakoff wrote that the court is satisfied that the company has taken steps to reform its corporate culture and prevent similar fraud from occurring again. Still, he noted that the level of fraud committed by WorldCom was "colossal and must be punished."
As part of the deal, MCI will pay $500 million in cash to investors. It will pay an additional $250 million in company stock to shareholders who were victims of the fraud when the company emerges from bankruptcy.
Corporate officials say they expect the company to emerge from bankruptcy within the next few months, at which time it will assume the name MCI.
Criminal charges against several corporate executives are part of a separate lawsuit.