WorldCom to pay record $750 million fine to investors

Out-Law News | 08 Jul 2003 | 12:00 am |

A court yesterday approved a deal between Worldcom and the US Securities and Exchange Commission (SEC) under which the troubled telecoms giant will pay $750 million to investors who lost money as a result of its $11 billion accounting fraud, the biggest in corporate history.

The SEC charged that WorldCom misled investors by overstating its income from at least as early as 1999 through the first quarter of 2002, as a result of undisclosed and improper accounting.

US District Court Judge Jed Rakoff concluded that "the proposed settlement is not only fair and reasonable but as good an outcome as anyone could reasonably expect in these difficult circumstances."

Put another way, it does not fully compensate investors because to do so would kill the company, which would inflict harm of Enron proportions, not least to its 50,000 employees.

According to Judge Rakoff, the civil penalty is 75 times greater than any prior penalty of its kind.

The ruling still requires the approval of the federal bankruptcy court.

Meanwhile, Arizona Attorney General Terry Goddard yesterday announced that rival telco Qwest Communications will pay $3.75 to settle its own fraud scandal.

The Denver company was taken to court in October 2001 alleging that it defrauded customers by placing unauthorised charges on their phone bills, refusing to provide refunds and continuing to levy charges for unauthorised services even after customers complained.

More information on the Worldcom deal is available at:
www.sec.gov/news/press/2003-81.htm