WorldCom settles with Oklahoma, restates results

Friday, March 12, 2004 | 11:06 a.m.

SUN WIRE REPORTS

OKLAHOMA CITY -- The state of Oklahoma has agreed to settle its criminal fraud case against the telecommunications giant MCI, state Attorney General Drew Edmondson announced today.

Under terms of the agreement, MCI would create 1,600 jobs in Oklahoma over the next 10 years and has pledged to assist the state in its prosecution of former executives of the company formerly known as WorldCom, he said.

"Since WorldCom's collapse a new company has emerged from the rubble. It was never our intention to put the company out of business and MCI has taken significant steps to clean its own house," Edmondson said.

"MCI has purged itself of bad actors, appointed new executives and an entirely new board of directors it has developed an extensive training program on business ethics and accounting rules and appointed an outside auditor."

MCI had faced a March 29 preliminary hearing in district court on charges contained in an indictment issued last year.

Edmondson has announced he will refile securities charges against ex-WorldCom Chief Executive Bernard Ebbers, who was hit with federal charges earlier this month that he directed an $11 billion accounting fraud, the biggest in U.S. corporate history. Ebbers' lawyer entered a plea of innocent on his behalf.

Oklahoma state prosecutors said the scandal led to heavy losses by Oklahomans, including $64 million lost by state pension funds.

Separately, WorldCom today restated its financial results. It had net losses of $73.7 billion from 2000 through 2002 after correcting accounting errors and writing down the value of company's assets.

The restatements allow Chief Executive Michael Capellas, who took the helm in late 2002, to lead WorldCom out of bankruptcy. The company filed for Chapter 11 in July 2002 after discovering $3.85 billion in errors that ballooned in the following months and led to the indictment on fraud charges of Ebbers.

WorldCom, the No. 2 U.S. long-distance telephone company, had reported profits for 2000 and 2001 before uncovering the fraud. The company, which is changing its name to MCI, never reported 2002 results. It had net losses of $48.9 billion in 2000, $15.6 billion in 2001 and $9.2 billion in 2002, Ashburn, Va.-based WorldCom said in a statement.

Oklahoma's charges against Ebbers are expected to be refiled by the end of the month. They were temporarily dropped late last year after a judge denied Edmondson's request to delay a preliminary hearing for Ebbers.

A May 17 preliminary hearing is set in Oklahoma for former WorldCom chief financial officer Scott Sullivan, who has pleaded guilty to federal charges in New York and agreed to testify against his former boss.

Ebbers and Sullivan were among six former employees of WorldCom who were accused of 15 violations of Oklahoma securities laws.