The US Securities and Exchange Commission drew a line under its fraud action against WorldCom Inc this week, when the embattled telecoms carrier agreed to a partial settlement in the case.
The move marks a major step forward in Clinton, Mississippi-based WorldCom’s rehabilitation effort yesterday, and its efforts to emerge from chapter 11, although the SEC reserves the right to seek a penalty from the company in the future.
The agreement also represents a relatively rapid conclusion to the SEC’s civil fraud action against WorldCom, which was launched in June after the company made the first in a series of financial restatements that eventually topped $9bn, and pitched it into chapter 11. When WorldCom’s financial misstatements first became apparent the SEC condemned what it described as improprieties of unprecedented magnitude. Earlier this month, it expanded its case against WorldCom, saying the company had misled investors from at least 1999.
Under the partial settlement, WorldCom neither admits or denies the commission’s allegations. WorldCom has agreed not to violate securities laws in the future. It also pledges to ensure its senior operational officers and financial reporting personnel receive training to minimize the possibility of future violations. It will retain a consultant to review the effectiveness of its internal accounting and agreed that the corporate monitor in the case will review its corporate governance and ethics policies.
It is understood that agreement ends the threat of action from the SEC. Even if further accounting misdeeds under its previous management are uncovered at the firm, these will be considered to be in the past and will not prompt further legal action by the SEC.
WorldCom’s senior management has been culled since the accounting scandal first broke in June. Both its former CFO Scott Sullivan and former controller David Myers are facing action over their role in the financial misstatements. Yesterday’s move by the SEC does not affect those cases.
In a statement, president and CEO John Sidgmore, said the agreement was in line with steps it had already taken to restore confidence in the company, and provides additional reassurance that WorldCom’s plan to emerge from bankruptcy remains on schedule.