Today the District Court reserved decision on the settlement, and issued an order requiring the parties to provide more information about a number of issues. The order further invites any others with interest in the case to file written comments with the Clerk of the District Court by 5 p.m. on June 6, 2003. The Court will convene a conference with the parties on June 11 at 4 p.m. to discuss where the case should go from there, and will not approve a settlement before that date. The Court will not, however, accept oral presentations from non-parties.
The Commission has alleged that WorldCom misled investors by overstating its income from at least as early as 1999 through the first quarter of 2002, as a result of undisclosed and improper accounting. (Litigation Release No. 17829). The Commission filed its case against WorldCom on June 26, 2002, the day after WorldCom announced that it intended to restate its financial results for five quarters-all quarters in 2001 and the first quarter of 2002. (Litigation Release No. 17588). The Commission also sought the appointment of a corporate monitor for WorldCom, and on July 3, 2002, U.S. District Judge Jed S. Rakoff appointed former SEC Chairman Richard Breeden to that position. Since the Commission filed its action against WorldCom, the company has made a series of announcements expanding its anticipated financial restatement due to the fraud, both in dollar amount and in time. WorldCom has acknowledged that, as a result of undisclosed and improper accounting, it materially overstated the income it reported on its financial statements by approximately $9 billion.
On November 26, 2002, the Commission obtained a judgment against WorldCom through which the Commission obtained the full injunctive relief it sought against WorldCom. In addition, the judgment ordered WorldCom to undertake extensive reviews of its corporate governance and internal controls, as well as required WorldCom to establish a training and education program for WorldCom officers and employees to minimize the possibility of future violations of the federal securities laws. The November 26, 2002 judgment explicitly left open the determination of monetary penalties to be imposed on WorldCom. (Litigation Release No. 17866).
In addition, the Commission has brought civil actions against four former employees of WorldCom. The Commission filed civil actions against former WorldCom Controller David F. Myers on September 26, 2002; former WorldCom Director of General Accounting Buford "Buddy" Yates, Jr., on October 7, 2002; and Betty L. Vinson and Troy M. Normand, former accountants in the WorldCom's General Accounting Department, on October 10, 2002. All four defendants consented to court orders enjoining them from future violations of the federal securities laws, and, in the case of Myers and Yates, prohibiting them from serving as an officer or director of any public company. (Litigation Release Nos. 17753 (Myers), 17771 (Yates), and 17783 (Vinson and Normand)). In addition, Myers, Yates and Vinson agreed to be suspended from appearing or practicing before the Commission as accountants. (Exchange Act Release Nos. 34-46962, 34-46963 and 34-46964)). The civil actions against the four individuals are still pending as to monetary relief.
In determining to enter into the settlement announced today, the Commission considered remedial acts promptly undertaken by WorldCom and cooperation afforded the Commission staff.
The Commission acknowledges the assistance and cooperation of the U.S. Attorney's Office for the Southern District of New York and the Federal Bureau of Investigation.
The Commission's investigation into the fraud at WorldCom is continuing.
