WorldCom Inc may pay a record fine to settle Securities and Exchange Commission (SEC) charges that the telephone company overstated profits by US$11 billion, according to people familiar with the matter.
The settlement, which must be approved by US District Court Judge Jed Rakoff, will likely exceed the US$400 million Citigroup Inc agreed to pay last month, the people said. An accord may be presented to Rakoff as soon as today, they said.
An agreement would allow WorldCom chief executive officer Michael Capellas to steer the company out of the largest US bankruptcy by October. The size of the fine will help SEC Chairman William Donaldson show that the commission has toughened its stance against companies that commit fraud.
"Corporations need to be held accountable for fraud, and the only way you can do that is to have a huge fine," said Richard Tilton, a Manhattan bankruptcy attorney and chief executive officer of Greenacre Asset Advisors LLC. "The idea is to make the claim so significant as to send a clear message that corporate fraud will be punished severely."
The Wall Street Journal earlier reported the talks.
Spokespeople for WorldCom, Brad Burns and Claire Hassett, didn't return calls or e-mails seeking comment. An SEC official declined to comment.
WorldCom, the second-largest US long-distance telephone company, won't admit or deny guilt as part of the agreement, the people said.
WorldCom is changing its name to MCI to help distance the company from the accounting scandal and bankruptcy. It also is moving its headquarters to Ashburn, Virginia, from Clinton, Mississippi.
The agreement in part reverses a preliminary deal forged in November, two weeks before Capellas joined the company. Under that pact, WorldCom could have avoided a fine if it complied with court-approved financial controls. WorldCom is required to hire an independent consultant to review its accounting and allow a court appointed monitor to review the company's governance.
A final decision on penalties was delayed until this year.
Citigroup last month agreed to its fine as part of a US$1.4 billion penalty levied against Wall Street firms for violating securities laws. Before that agreement last month, Xerox Corp's US$10 million settlement with the SEC over US$2 billion of inflated earnings was the largest ever paid.
The SEC needed to demand a large fine from WorldCom given the size of the accounting misstatements, lawyers said. This may help revive the commission's image as it faces calls from lawmakers to be tougher on corporate wrongdoing after the accounting scandals at WorldCom, Enron Corp, and Tyco International Ltd.
"The pressure on the SEC is enormous," said David Becker, a former SEC general counsel now with Cleary Gottlieb Steen & Hamilton in Washington. "The world wants to see that they are tough."
The fine may add more financial strain to WorldCom, which disclosed Friday that former CEO Bernard Ebbers last month missed the first payment on a US$408.2 million loan he received from the company. Investor anger over the loan contributed to his ouster last month.
Taiwan’s Lee Chia-hao (李佳豪) on Sunday won a silver medal at the All England Open Badminton Championships in Birmingham, England, a career best. Lee, 25, took silver in the final of the men’s singles against world No. 1 Shi Yuqi (石宇奇) of China, who won 21-17, 21-19 in a tough match that lasted 51 minutes. After the match, the Taiwanese player, who ranks No. 22 in the world, said it felt unreal to be challenging an opponent of Shi’s caliber. “I had to be in peak form, and constantly switch my rhythm and tactics in order to score points effectively,” he said. Lee got
EMBRACING TAIWAN: US lawmakers have introduced an act aiming to replace the use of ‘Chinese Taipei’ with ‘Taiwan’ across all Washington’s federal agencies A group of US House of Representatives lawmakers has introduced legislation to replace the term “Chinese Taipei” with “Taiwan” across all federal agencies. US Representative Byron Donalds announced the introduction of the “America supports Taiwan act,” which would mandate federal agencies adopt “Taiwan” in place of “Chinese Taipei,” a news release on his page on the US House of Representatives’ Web site said. US representatives Mike Collins, Barry Moore and Tom Tiffany are cosponsors of the legislation, US political newspaper The Hill reported yesterday. “The legislation is a push to normalize the position of Taiwan as an autonomous country, although the official US
CHANGE OF TONE: G7 foreign ministers dropped past reassurances that there is no change in the position of the G7 members on Taiwan, including ‘one China’ policies G7 foreign ministers on Friday took a tough stance on China, stepping up their language on Taiwan and omitting some conciliatory references from past statements, including to “one China” policies. A statement by ministers meeting in Canada mirrored last month’s Japan-US statement in condemning “coercion” toward Taiwan. Compared with a G7 foreign ministers’ statement in November last year, the statement added members’ concerns over China’s nuclear buildup, although it omitted references to their concerns about Beijing’s human rights abuses in Xinjiang, Tibet and Hong Kong. Also missing were references stressing the desire for “constructive and stable relations with China” and
‘CROWN JEWEL’: Washington ‘can delay and deter’ Chinese President Xi Jinping’s plans for Taiwan, but it is ‘a very delicate situation there,’ the secretary of state said US President Donald Trump is opposed to any change to Taiwan’s “status quo” by force or extortion and would maintain that policy, US Secretary of State Marco Rubio told the Hugh Hewitt Show host on Wednesday. The US’ policy is to maintain Taiwan’s “status quo” and to oppose any changes in the situation by force or extortion, Rubio said. Hewitt asked Rubio about the significance of Trump earlier this month speaking with Taiwan Semiconductor Manufacturing Co (台積電) chairman C.C. Wei (魏哲家) at the White House, a meeting that Hewitt described as a “big deal.” Asked whether the meeting was an indication of the
RSS