Tuesday, July 8, 2003

$750M WorldCom penalty approved

Judge: Goal is not to shut it down

The Associated Press

WASHINGTON - A federal judge Monday approved a $750 million settlement between federal regulators and WorldCom Inc., saying a substantially heavier fine for a corporate accounting fraud scandal would unfairly penalize the company's 50,000 employees.

Although the fine in the $11 billion case was $250 million higher than originally proposed, U.S. District Judge Jed Rakoff of Manhattan said driving the telecommunications company out of business was not the goal.

Rakoff said WorldCom, through a court-appointed monitor, has attempted to overhaul its corporate culture and agreed to continued monitoring to prevent similar fraud from recurring.

The judge has also obtained from the company's new CEO a sworn "ethics pledge," requiring greater openness than SEC rules require.

"The court is satisfied that the steps already taken have gone a very long way toward making the company a good corporate citizen," the judge wrote.

"This is not to say the sins of the past can be forgotten or wholly forgiven. Those frauds were still colossal and must be punished."

The Securities and Exchange Commission and the company had initially proposed a $500 million fine, but eventually agreed to increase that amount after complaints WorldCom would emerge too easily from bankruptcy.

The new figure adds $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 court and is liquidated, the penalty would remain $500 million.

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