CORPORATE CRIME REPORTER
MCI Gets Non Pros Agreement for $11 Billion Fraud
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Corporate Crime Reporter 34(5), September 1, 2005
Federal officials in New York City today decided not to file criminal charges
against MCI, the successor to WorldCom, Inc., for perpetrating one of the nation’s
largest financial frauds.
The U.S. Attorney in New York said that he decided not to criminally prosecute
MCI for the $11 billion fraud because in June 2002, the company reported to
federal officials the discovery of the fraudulent accounting entries that were
at the heart of the WorldCom fraud.
And since then, MCI has fully cooperated with the federal investigation, the
U.S. Attorney, David Kelley said.
Kelley said that he also took into account MCI’s prompt settlement of
an enforcement action by the United States Securities and Exchange Commission
(SEC), a settlement which included the payment of a $750 million civil monetary
penalty, and which provided restitution to victimized shareholders, MCI’s
substantial remedial actions since disclosure of the fraud, including the implementation
of entirely new management and a new board of directors and “the negative
effect that charges against MCI would have on the company’s innocent employees
and legitimate activities.”
In July 2005, MCI entered into an agreement with the victims of the fraud and
its former CEO, Bernard Ebbers.
As part of that agreement, Ebbers agreed to turn over virtually all of his assets
to a trust. Those assets will be sold in the coming months, with the proceeds
being split between the victims and MCI.
“The public interest has been sufficiently vindicated by the successful
criminal prosecution of the principal individual wrongdoers – Bernard
Ebbers and Scott Sullivan,” the U.S. Attorney’s office said in a
statement. “Moreover, criminal prosecution of the company would likely
have a severe and unintended economic impact upon thousands of innocent MCI
employees and could harm the impending merger between MCI and Verizon Communications
Inc.”
“Accordingly, the U.S. Attorney has determined, after carefully balancing
all of the factors set forth in the Thompson Memorandum, that criminal prosecution
of MCI would not serve the public interest, so long as MCI fully complies with
the terms of the non-prosecution
agreement.”
Corporate Crime Reporter
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