MCI Clears the Decks

Just a month after taking a timeout to get its act together, MCI closed the books Friday on some $74 billion in false profits.

The company made public revised 2000 and 2001 annual reports Friday that outlined some of the $11 billion in revenue overstatements during the Bernie Ebbers era. The company also posted a $9.2 billion audited 2002 loss. The papers, filed with the Securities and Exchange Commission and the federal bankruptcy court, clear the way for MCI to emerge from Chapter 11 protection next month.

"This filing culminates the largest and most complex financial restatement ever undertaken," said financial chief Bob Blakely. "It is one of the last remaining milestones on our path to emerge from Chapter 11 protection."

MCI also said Friday it settled state securities fraud charges with Oklahoma. Under terms of the agreement, MCI will create 1,600 jobs in Oklahoma over 10 years and will help the state pursue cases against former executives. The state had been the first to charge ex-CEO Ebbers in a criminal case, though those charges were put on hold for a federal case that's now pending.

MCI, which was known as WorldCom at the time of its collapse, made accounting adjustments Friday that resulted in subtracting more than $70 billion in pretax income due to adjustments and writedowns. WorldCom was a fast-growing stock market favorite throughout the 1990s, but Friday's filings make crystal clear that the company's financial foundation was never as stable as tech-happy investors believed.

The filings come just a week after federal prosecutors charged Ebbers, the longtime former CEO of the onetime telecom highflier, and ex-financial chief Scott Sullivan with three counts each of securities fraud, conspiracy and making false statements. The government alleges that the men conspired to deceive investors about WorldCom's true financial health.

Sullivan pleaded guilty and agreed to cooperate with federal prosecutors. Ebbers pleaded innocent and is free on bail, though his travel is restricted to three states and Washington, D.C.