SEC modifies proposed MCI settlement

Victims of MCI's fraud could receive more compensation if a modification settlement terms proposed by the US Securities and...

Victims of WorldCom's fraud could receive more compensation if modification settlement terms proposed by the US Securities and Exchange Commission (SEC) is approved by the courts.

The SEC modified its proposal for a settlement of its claim for a civil penalty in its civil action against MCI, which is still legally known as WorldCom, and has asked the company contribute stock worth $250m (£150m), in addition to the $500m in cash already required, to compensate victims of its fraud.

SEC had proposed that MCI could meet its obligations by making a payment of $500m when it emerged from bankruptcy - although the actual settlement called for a payment of $1.51bn (£909m).

The amendment to this proposal filed with the responds to issues raised by the district court judge, and has been agreed with MCI and the official committee of unsecured creditors of WorldCom. However, it must still be approved by the district court.

In the event that a reorganisation plan for the company is agreed by the bankruptcy court, the revised proposal calls for payment of $500m in cash and the transfer of common stock in the reorganised company worth $250m into a fund for victims of the fraud.

"We appreciate the efforts of everyone involved in reaching this decision, which remains subject to court approval," chief financial officer Bob Blakely said. "We believe that it is another significant step toward MCI's emergence from Chapter 11."

The SEC began its action against MCI last year, filing fraud charges in June, the day after the company said it would restate earnings for five consecutive quarters ending with first quarter of 2002, due to accounting irregulatiries.

MCI later admitted, by stages, to further accounting irregularities totalling more than $9bn.

Peter Sayer writes for IDG News Service

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