Judge waves through Worldcom $750m settlement
Activists cry foul
The disgraced company formerly known as Worldcom has received court approval for the revised proposed settlement over SEC penalties for the biggest accounting fraud in history.
The US Securities and Exchange Commission had imposed a civil penalty of $2.25bn on MCI/Worldcom, but accepted first a $500m cash settlement and, when it became clear that this was not enough for shareholders, accepted a higher offer of $750m, with the extra amount consisting of common stock to be awarded to shareholders and bondholders.
MCI will now want to get on with moving itself out of Chapter 11. But it will have a much tougher job of persuading shareholder activists to draw a line under the past than sundry regulators and judges. Organisations representing senior citizens, churches and disgruntled small shareholders are demanding that the US Government bars MCI/Worldcom from federal contracts.
Here's a statement from Will Thomas, director of the Corporate Accountability Project of the Gray Panthers.
Judge Rakoff's unfortunate decision to ratify the SEC-MCI/WorldCom settlement comes on the heels of MCI/WorldCom's de facto admission of guilt -- $250 million in new company stock to those who lost $176 billion, including pensioners and 401(k) holders. The new arrangement offers eight cents a share to all those ripped-off investors. It's simply another sweetheart deal arranged for MCI/WorldCom in the Federal government's ongoing campaign to keep the company afloat at all costs.
We're disappointed by Judge Rakoff's decision, but we're far from discouraged. The campaign to hold MCI/WorldCom accountable for its $11 billion fraud is far from over. Congress is now questioning the failure of the General Services Administration to debar MCI/WorldCom from Federal contracting; we know there is hope that retirees, taxpayers, and investors will see the company held to account for its epic fraud. Senators Collins, Hatch, Kennedy, and Santorum deserve much praise and credit for their leadership on this issue. The American people were promised that Washington was serious about cleaning up the fraud in corporate boardrooms. The Gray Panthers want to see results. We won't stop in our efforts to see to it that MCI/WorldCom is barred from Federal contracting and off the gravy train..
Now for Tom Schatz, President of Citizens AGainst Government Waste.
It is disappointing that the company that commits the greatest fraud in American history, $11 billion, leading to a loss of $180 billion to the retirement accounts and savings of thousands of people receives only a slap on the wrist. This decision sends the message that corporate crime does pay. As Judge Rakoff noted, while the company's 50,000 employees deserve protection, so do taxpayers and investors. This fine is not sufficient to act as a deterrent to future corporate corruption.
We suspect the Worldcom saga will run and run. ®