WorldCom Inc. is in talks with the U.S. Securities and Exchange Commission (SEC) to settle its fraud case against the company. A deal could be announced within a week or two, The New York Times reported in its online edition on Tuesday.
Under the deal, the SEC would ask a federal judge to dismiss the fraud charges it brought against WorldCom in June. WorldCom would have to pay millions of dollars in fines and agree to a consent decree barring it from violating securities laws, according to the report.
The parties presented their settlement plan to Judge Jed Rakoff in the U.S. District Court for the Southern District of New York earlier this week, according to the article, which cites sources involved with the negotiations. Rakoff oversees the SEC's case against WorldCom.
A spokeswoman for WorldCom in Europe declined to comment.
News of the settlement talks comes a day after former U.S. Attorney General Richard Thornburgh sharply criticized WorldCom in a 122-page report on the Clinton, Mississippi, company's massive accounting problems. Thornburgh, appointed in August by the bankruptcy court to examine WorldCom, reports that WorldCom had a "number of troubling and serious issues" related to its culture, internal controls, management, integrity, disclosures and financial statements.
WorldCom itself released a statement on Monday laying out the steps it has taken to uncover all of its past financial problems and prevent more in the future. "We are working to create a new WorldCom," John Sidgmore, WorldCom president and chief executive officer said in the statement.
WorldCom filed for bankruptcy protection in July after it announced $3.85 billion in improperly-booked expenses involving results for 2001 and 2002. Those accounting errors have led to federal criminal charges against WorldCom's former chief financial officer and a former corporate controller.
In August, WorldCom's woes grew worse as it disclosed that it had discovered an additional US$3.33 billion in improperly-reported earnings before interest, taxes, depreciation and amortization (EBITDA) and would be forced to restate earnings for 2000.