WorldCom will compensate investors
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A US court has approved a plan to make WorldCom pay a record $750m (£450m) to investors who lost money as a result of its accounting fraud.
The settlement was agreed between the company and the US regulator, the Securities and Exchange Commission (SEC).
The sizeable sum will settle the telecom giant's $11bn accounting fraud.
US District Judge Jed Rakoff agreed that WorldCom would pay $500m in cash and $250m in stock issued after it emerges from bankruptcy protection.
"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 Rakoff said in his ruling.
Fine tuning
WorldCom's fine was initially set at $1.5bn, but was then reduced after the company went into Chapter 11 bankruptcy.
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This is not to say the sins of the past can be forgotten or wholly forgiven
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However, the SEC later agreed to increase the amount to $750m after complaints from rivals, such as AT&T Corp. and Verizon Communications, that WorldCom would emerge too easily from bankruptcy.
The approval from the court will pave the way for WorldCom's emergence from bankruptcy.
"The court is satisfied that the steps already taken have gone a very long way toward making the company a good corporate citizen," said the judge.
"This is not to say the sins of the past can be forgotten or wholly forgiven. Those frauds were still colossal and must be punished."
The funds will be paid to shareholders and bondholders who lost money as a result of the company's irregular accounting.
WorldCom has already agreed with the SEC not to violate securities laws in the future.
It has also overhauled its board of directors and appointed a new chairman and chief financial officer.
Downfall
WorldCom was among the fastest growing and most aggressive players in the 1990s telecom and internet boom.
In June 2002 the company admitted that it had improperly recorded almost $4bn in expenses to inflate its earnings.
A month later that number was changed to $11bn as the company filed for the biggest bankruptcy in US history.
Its record settlement far exceeds a $400m fine issued by the SEC earlier this year to Citigroup's Salomon Smith Barney investment banking unit.
This was part of a $1.4bn settlement with Wall Street firms over biased analyst research.
WorldCom also plans to change its name to MCI once it has emerged from Chapter 11 bankruptcy.