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MCI Pleads Innocent to Oklahoma Charges

September 11, 2003

OKLAHOMA CITY (AP) _ MCI pleaded innocent Thursday to the first criminal charges brought against the telecommunications company in an $11 billion accounting fraud that Oklahoma prosecutors say violated state securities law.

After entering the plea at a hearing in Oklahoma County District Court, Carol Petren, MCI deputy general counsel, released a statement criticizing Oklahoma Attorney General Drew Edmondson for pursuing the case.

``It is extremely disheartening that Mr. Edmondson has brought charges against a company given the dramatic steps MCI has taken to put its house in order,″ Petren said. She noted that new management and internal controls at the company, which has changed it’s name from WorldCom, will help prevent a repeat of the problems that led to the nation’s largest ever accounting fraud and bankruptcy.

``This action against MCI as a company only hurts innocent employees,″ Petren said.

But Edmondson replied that, ``Nobody’s lost their jobs because of the filings in Oklahoma,″ and that it would not help the state to put the company out of business.

``If the court orders restitution, WorldCom would have to be in business, and strongly in business, for that to be meaningful,″ he said. ``On the other hand, the fact that WorldCom is under new management means very little to Oklahoma victims, some of whom lost their entire retirement savings because of that company’s fraud.″

The Oklahoma case, which surprised and irked federal authorities, also includes the first criminal charges filed against Bernie Ebbers, the former chief executive who presided over the telephone company while billions in operating expenses were disguised on financial statements to inflate profits.

Last week, Ebbers pleaded innocent to 15 charges that he defrauded Oklahoma investors and was released on $50,000 bail. The company and the other defendants face identical charges.

Each of the 15 charges carry a prison term of 10 years and a $10,000 fine. The company could also be ordered to pay restitution.

Other former WorldCom executives have been charged in federal court, including ex-chief financial officer Scott Sullivan, who was also charged in Oklahoma and is to make a court appearance on Sept. 17.

Four other former executives who have pleaded guilty to federal charges and are helping prosecutors are charged in Oklahoma as well: David Myers, Buford Yates Jr., Betty Vinson and Troy Normand. Court dates have not yet been set for these four.

State Attorney General Drew Edmondson charged WorldCom and the former officials on Aug. 27 on behalf of individual Oklahoma investors and state pension funds which lost $64 million on WorldCom investments.

The decision to press state charges against WorldCom and Ebbers has upset federal authorities, who are worried the Oklahoma case may disrupt their own investigation.

The Oklahoma case against Ebbers, who was released on $50,000 bail, is scheduled to resume with a pretrial conference on Oct. 30. The others charged are David Myers, Buford Yates Jr., Betty Vinson and Troy Normand.

Elsewhere on Thursday, a bankruptcy court in New York resumed hearings on the company’s plan to emerge from the biggest Chapter 11 in U.S. history.

Lawyers for MCI reported progress in ironing out the details of a last-minute settlement with some of the few major creditors who hadn’t approved the plan, which would repay only about $5 billion of the $41 billion WorldCom owed before bankruptcy.

The settlement, in which MCI agreed pay out an additional $353 million in cash and new debt securities, was reached earlier this week just as hearings commenced on whether the debt reorganization plan should be approved.

A revised plan reflecting the settlement is expected to be ready for creditors to review by Monday, MCI’s lawyers told the court.

The vast majority of creditors had already signed on in favor of the existing plan. Still, MCI was motivated to get more creditors on board so as to avert some courtroom mud-slinging and help speed the company’s exit from the cloud of bankruptcy.

As it is, MCI is struggling to restore its reputation amid the ongoing federal and state investigations into falsified financial reports that hid expenses and inflated profits.

Complicating the effort to put the scandal in the past is a new probe into allegations that MCI has been illegally disguising long-distance calls to avoid paying fees owed to local phone companies that connect such calls.

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