Goldman to Refund $9.5 Million to MCI
In a case of what might be called too little, too late, MCI will recoup $9.5 million it paid to Goldman Sachs for advice just prior to filing for bankruptcy in the wake of a massive accounting fraud at the company then known as WorldCom.
Goldman was hired in 2002 to help with raising capital, arranging financing, discussing mergers and selling company assets, the Associated Press reported.
A settlement between Goldman and MCI was reached in December was approved yesterday by U.S. Bankruptcy Judge Arthur J. Gonzales, who is supervising MCI’s Chapter 11 proceedings in New York. MCI lawyer Alfredo R. Perez told the AP that Judge Gonzalez approved the settlement during a hearing Thursday.
Goldman reportedly agreed to refund the money. Federal law gives bankrupt companies some latitude in getting out of contracts and recouping some payments.
The $9.5 million may not seem like much to a company the size of MCI, but repositioning itself to one day emerge from bankruptcy has cost the company a fortune.
An audit report of professional fees in the company’s bankruptcy case was filed in federal court in November that shed light on the high cost of high stakes bankruptcy proceedings.
The company, which won a Gonzales’s approval for its reorganization plan in early November, has piled up fees at a rate of $10 million a month, according to The Washington Post.
The company is paying its own bankruptcy law firm as much as $3 million a month, but it is also required to pay for its creditors' lawyers and financial advisers, paying $150 million in fees during the past year. More than $40 million of that paid for the company’s investigation into the massive accounting scandal that led to the biggest bankruptcy case on record.