WorldCom Inc offered an additional US$250 million in common stock to a proposed US$500 million accounting fraud penalty, hoping the sweetened offer will win court approval for the record settlement.
The revised settlement proposal, announced Wednesday, was reached with the US Securities and Exchange Commission (SEC) and is subject to a federal bankruptcy judge's approval.
WorldCom would issue the shares after the company reorganizes and its new stock is trading.
The new shares "would allow victims of the fraud to share in the potential upside of owning WorldCom common stock when it emerges from bankruptcy," the SEC said in a statement.
In May, WorldCom agreed to settle the SEC's civil fraud charges by paying US$500 million to shareholders who lost money because of the accounting fraud.
The additional funds were added to the settlement to address concerns raised by US District Judge Jed Rakoff, the New York judge overseeing the case.
The revised settlement has the support of WorldCom's creditors, the SEC said.
At a hearing last month, Rakoff said he was intrigued by the idea of MCI offering company stock as part of the settlement.
WorldCom chief financial officer Bob Blakely called the revised proposal "another significant step toward MCI's emergence from Chapter 11 expected this fall."
The company and SEC filed the revised settlement late Wednesday with both courts.
The previous settlement actually called for a US$1.5 billion fine, but the amount would be reduced to US$500 million as part of the company's bankruptcy case.
WorldCom, once among the fastest-growing and most aggressive players in the 1990s telecom and Internet boom, is accused of falsifying balance sheets to hide expenses and inflate earnings.
It filed for bankruptcy July of last year.
Critics of the initial settle-ment, including WorldCom competitors AT&T, Verizon Communications Inc. and SBC Communications Inc., urged Rakoff to reject the proposal and seek a harsher penalty.
Critics have called the settlement puny, given WorldCom's revenues and the scope of the financial fraud, which has soared to US$11 billion.
As part of its reorganization, WorldCom is asking the bankruptcy court for approval to change its name to MCI and to establish new headquarters in Ashburn, Virginia.