Posted on 05/18/2003 9:32:09 PM PDT by HAL9000
NEW YORK -- The Securities and Exchange Commission and MCI, formerly known as WorldCom Inc. , are expected to announce as early as Monday a final agreement to settle charges that the telecom company misled investors with more than $11 billion of accounting fraud, according to people familiar with the matter, the Wall Street Journal has learned.As part of the settlement pact, MCI will pay the largest fine ever levied by the SEC against a corporation that isn't a broker-dealer, these people said. The fine is expected to be "exponentially larger" than the $10 million fine levied against Xerox Corp. last year, which was the largest penalty to date. The SEC recently imposed larger fines against several broker-dealers as part of the agency's global settlement with 10 Wall Street firms.
SEC and MCI officials have been working for months to agree on the size of a fine after the two sides reached a partial settlement last November, in which MCI agreed not to mislead investors about its finances and improve its internal controls.
The SEC, which moved to sue MCI within 24 hours last June after the company first disclosed its fraud, wanted to impose a penalty that showed the agency is serious about punishing companies that commit fraud, according to a person with knowledge of the matter. The size of the fine is expected to reflect the magnitude of the fraud within the former WorldCom, once one of the highest- fliers on Wall Street.
The accounting fraud has spiraled in size many times since WorldCom's initial announcement, and is now the largest in U.S. history. The company, which has changed its name to MCI, is expecting a sizable fine in keeping with the extent of the fraud.
Still, MCI officials are understood to be eager to strike a settlement with the SEC as it attempts to move on and emerge from bankruptcy as early as September. MCI executives couldn't be reached for comment.
Separately, Bernard J. Ebbers, who was ousted as chief executive from WorldCom a year ago, failed to make his first payment on more than $400 million in loans he owes MCI, according to a document filed Friday with the U.S. Bankruptcy Court.
Mr. Ebbers didn't make the initial payment of $25 million plus interest to MCI, which is the new name of the telecommunications firm, on the due date of April 29, according to the filing. Accordingly, he is now technically in default on the loan.
Mr. Ebbers has been working with MCI officials to sell the assets that he used as collateral to secure the loans. Already, the company has sold the yacht-building business in Savannah, Ga., owned by Mr. Ebbers, for about $15 million. MCI, which has taken over the sale of Mr. Ebbers's properties, is understood to be close to selling his 164,000-acre ranch in British Columbia, which is expected to fetch from $60 million to $70 million, people close to the situation say.
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