Telecommunications giant MCI, formerly known as WorldCom, agreed on Monday to pay a record $500 million fine to the Securities and Exchange Commission, the latest step in the company's road to recovery from the largest corporate bankruptcy in U.S. history.
The $500 million fine makes mincemeat out of the puny $10 million fine the SEC levied against Xerox last year for accounting irregularities. At the time, $10 million was the largest fine ever charged by the SEC against a non broker-dealer. Originally, the SEC sought to obtain $1.5 billion in fines against MCI but both sides settled for $500 million. The Bankruptcy Court and the U.S. District Court must now approve the fine. That approval is expected in early June.
WorldCom stunned investors last summer when it announced $11 billion in accounting irregularities, restated financial statements for six quarters, and filed for Chapter 11 bankruptcy protection. The company changed its name to MCI last month.
The SEC reached an agreement with WorldCom last fall in which WorldCom agreed not to violate any securities laws in the future, to provide appropriate training to its executives so as to minimize the possibility of securities violations occurring, to retain a consultant who would review the internal controls and policies at WorldCom, and to allow a Corporate Monitor to review the adequacy and effectiveness of WorldCom corporate governance and ethics policies.
MCI is expected to emerge from its Chapter 11 bankruptcy protection later this year and analysts predict the company will be a formidable competitor with the other large telecommunications companies including AT&T, Sprint, SBC, and Verizon. MCI posted a profit in January of this year.