NEW YORK – A federal judge approved a partial settlement between WorldCom and federal regulators Tuesday that calls for an unspecified fine and continued government oversight of the telecommunications company.
The settlement, stemming from civil fraud charges related to the company's $9 billion accounting scandal, includes a permanent injunction barring further violations of security laws, U.S. District Judge Jed Rakoff said.
The settlement also calls for the continuation of a court-appointed monitor for WorldCom, with the possibility of expanding the monitor's role, Rakoff said.
WorldCom also agreed to hire an outside consultant to review its internal accounting controls, and provide mandatory accounting and ethics training for accounting employees for at least three years.
Rakoff is not expected to decide on Worldcom's fine until next year. SEC officials would not say what size fine they would seek. WorldCom lawyer Paul Curnan said the company hoped to persuade Rakoff not to issue any fine.
Of the fine, Rakoff said he had received many letters from company investors recounting "pain they have felt" from the company's July bankruptcy. But he also said he would consider WorldCom's reform efforts.
Mississippi-based WorldCom, whose MCI unit is the No. 2 U.S. long-distance company with 20 million customers, filed the largest bankruptcy in the nation's corporate history in July.
The SEC has charged WorldCom with fraud for misleading investors by misstating and hiding expenses. WorldCom has admitted to at least $9 billion in erroneous accounting.
After the hearing, court-appointed monitor Richard Breeden called the partial settlement "a big step forward for this company and a positive outcome for the SEC as well." Breeden also said he expected the resignations of seven WorldCom board members who were at the company during the accounting fraud.
Four WorldCom executives have pleaded guilty to their roles in the accounting misstatements that plunged the telecommunications giant into bankruptcy.
Former chief financial officer Scott Sullivan has been indicted. He has maintained his innocence.