emerged from a partial settlement with federal prosecutors firmly on track to present its reorganization plan this spring.
Just four months after the failed telco made the biggest-ever Chapter 11 bankruptcy filing, WorldCom and the
Securities and Exchange Commission
laid out the latest developments in a Tuesday afternoon courthouse press conference. The company has escaped financial penalties for now, though prosecutors left the door open to fines when they make recommendations to the court this spring.
WorldCom agreed to five key terms in the first-stage settlement with prosecutors. Under the agreement, the company:
- Agreed to "accept for purposes of penalty" that it had committed accounting fraud by overstating $9 billion in costs. Of course, in accepting the settlement the company neither admits nor denies the fraud charges.
Agreed to continue to report to court-appointed monitor and former SEC chief Richard Breeden.
Agreed to hire a consultant who will recommend appropriate accounting safeguards.
Agreed to subject finance employees to three years of accounting and ethics training.
And agreed not to break securities laws ever again.
All the parties expressed optimism about the company's progress.
"I have to compliment the parties," federal judge Jed Rakoff said. "I think it shows the company has made laudable progress in moving toward a much more positive position and the correction of past mistakes."
Lawrence West, assistant director of the SEC's enforcement division, and Peter Bresnan, the agency's lead lawyer on the WorldCom case, commended the court for a "strong and fair decision" on the partial ruling.
WorldCom filed for bankruptcy on July 21, less than a month after the once-hot telco shocked Wall Street by disclosing a massive accounting fraud. Since then prosecutors have enlisted four former WorldCom workers to testify in criminal cases being brought against top executives of the company when the fraud took place. Scott Sullivan, the company's former financial chief, was arrested in August on charges that he engineered the fraud.
Check out my new and improved The Tech Edge newsletter. The new Tech Edge provides you with exclusive access to my investigative reports each week as well as real-time portfolio picks from Jordan Kahn, CFA, a new contributor to my newsletter.
for a 14-day free trial.