A US judge last night approved a $750m settlement between bankrupt telecoms giant WorldCom and market regulators, marking a major step in the company's rehabilitation after an $11 billion accounting fraud.
'The court is convinced that the proposed settlement is not only fair and reasonable, but as good an outcome as anyone could reasonably expect,' Judge Jed Rakoff said in his ruling.
The court's decision is a positive watershed for WorldCom, renamed MCI earlier this year, as it seeks to emerge from bankruptcy.
In deliberating on the settlement proposed by the company and the Securities Exchange Commission, Rakoff had taken into account the wishes of some shareholders and telecoms industry rivals who felt WorldCom should be liquidated.
The loss to WorldCom shareholders as a result of the fraud - the biggest accounting scandal in corporate history - has been estimated at around $200 billion.
But in his 14-page ruling, Rakoff said killing off the company would 'unfairly penalise' its 50,000 innocent employees and remove a major competitor from a market that involves significant barriers to entry.
He also argued recognition for WorldCom efforts to bring the company back onto the path of good corporate citizenship.
Of the total penalty, $500m will be paid in cash and the rest in the form of the company's new common stock.
MCI chairman Michael Capellas welcomed the judge's ruling as a 'positive reflection of the hard work and dedication of MCI's employees, the loyalty of our customers and the support of our creditors'.
Several WorldCom senior executives, including the company's former CFO Scott Sullivan, have been charged with securities fraud and now await trial.
