- The Washington Times - Wednesday, June 11, 2003

NEW YORK (AP) — WorldCom Inc. and government regulators went before a federal judge yesterday to defend a settlement plan that would fine the bankrupt long-distance giant $500 million.

Critics, including WorldCom competitors AT&T; Corp. and Verizon Communications Inc., had urged U.S. District Judge Jed S. Rakoff to reject the settlement and seek a harsher penalty.

“Everyone can second-guess the amount of a settlement and always will,” WorldCom attorney Paul Curnan told the judge.

The judge did not immediately rule on the matter and seemed likely to delay his decision.

The deal, which would settle fraud accusations brought by federal regulators after WorldCom’s spectacular bankruptcy, is designed to funnel the money to investors harmed by the company’s $11 billion accounting fraud.

The fine would be the largest ever imposed on a company by the Securities and Exchange Commission. But critics and competitors have argued it is too small, considering that WorldCom’s collapse wiped out an estimated $180 billion in shareholder value.

WorldCom and the SEC announced the settlement last month. The SEC has suggested that proportionately more of the settlement money go to people who invested closer to the time the fraud was revealed.

Investigators say WorldCom, once among the fastest-growing and most aggressive players in the 1990s telecommunications and Internet boom, falsified its balance sheets to hide expenses and inflate earnings.

Earlier this week, a report revealed former CEO Bernard Ebbers had been in meetings in which company officials discussed ways to artificially inflate revenue.

A second report, prepared by former Attorney General Richard Thornburgh for a bankruptcy judge in New York, described a corporate culture “with virtually no checks or restraints placed on their actions by the board of directors or other management.”

Four former company executives have pleaded guilty to criminal charges in the Justice Department’s fraud investigation and are helping federal prosecutors.

Former chief financial officer Scott Sullivan, who has denied wrongdoing, is free on $10 million bail while he awaits trial next year. Mr. Ebbers has not been charged.

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