WorldCom to pay $500m fine over accounting fraud

WORLDCOM has agreed to pay about $500 million to settle Securities and Exchange Commission charges that the telephone company overstated profits

The penalty, which must be approved by US District Court Judge Jed Rakoff, would be the largest levied against a company for accounting fraud. The SEC set a $1.5 billion penalty and agreed in advance to reduce it by two-thirds as part of WorldCom’s Chapter 11 proceedings. Rakoff may make a decision today.

The settlement would lift an obstacle to chief executive Michael Capellas’s effort to guide WorldCom out of the largest US bankruptcy by October. The size of the penalty will help SEC chairman William Donaldson show that the commission has toughened its stance against companies that commit fraud, lawyers said. A partial deal in November had left open the possibility WorldCom may avoid paying a fine.