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Judge Approves $750 Million WorldCom Fraud Settlement

Aired July 08, 2003 - 06:16   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


KRIS OSBORN, CNN ANCHOR: Meanwhile, let us check on business for investors, some of whom lost money when WorldCom filed for bankruptcy. They are getting some relief now.
Let's get details on this from Carrie Lee at the Nasdaq market site.

Good morning -- Carrie.

CARRIE LEE, CNN FINANCIAL NEWS CORRESPONDENT: Good morning, Kris. They are getting some relief, but not all investors are satisfied with this. Here are the details.

A federal judge has approved WorldCom's offer to settle its civil fraud charges and this puts the company one step closer to emerging from bankruptcy. Now the troubled telecom, now known as MCI, will pay $500 million in cash and $250 million in stock to shareholders and bondholders. Now WorldCom's payout is the largest ever fined in an accounting fraud case. The accounting fraud totaling some $9 billion. But other -- some people think that this is not enough punishment for the enormity of the crime committed.

Now this all still needs to be approved by a bankruptcy court, but this U.S. district judge says that this is enough of a penalty. The company does plan to emerge from Chapter 11 bankruptcy this fall. They don't want to kill the company outright, Kris, with too much of a fine, but they do want it to be sufficient enough for people to get some of their money back. By the way, the company also cut its financial guidance for 2003 and 2005 -- through 2005, basically citing revenue targets that will be hard to reach because of pricing pressures in this space.

OSBORN: Well, in fact, Carrie, I understand that a number of investors who lost money due to the very scandals last summer, in part due to WorldCom and other companies, are finding and asking for ways to get some money back.

LEE: Right. They -- some people certainly want more money because they're not reaping or getting back all of the money that they lost but merely a percentage of it. So the question is does the company -- should the company be able to emerge at all and continue doing business going forward and that is what this judge seems to be believing.

If I can do a quick check on the futures, actually things are looking pretty flat this morning. Remember we saw a very nice rally yesterday, a lot of people betting on the second half recovery. The Dow gaining 146 points, the Nasdaq up 57. That translates into a 3.5 percent gain yesterday on the technology heavy index. This morning, Kris, we'll hear from Alcoa, the first Dow component to report for the second quarter of the year.

OSBORN: Well then, Carrie, aren't some of the gains due to a boost in e-commerce? Some of the numbers were suggesting that sales by wholesalers were coming in for 2001 at a huge -- at an increase of about 13 percent or so.

LEE: Yes, it's interesting because we are seeing some signs of an economic recovery or certainly that things aren't getting worse, that they're starting to improve. But then remember last week we got a weaker-than-expected reading on the unemployment rate for the month of June. So a mixed bag and a lot of the positives, Kris, people say are already priced into stocks. So we'll see what happens today, but so far things looking pretty flat, as I said.

OSBORN: Thank you very much, Carrie, from the Nasdaq market site.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com







Aired July 8, 2003 - 06:16   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KRIS OSBORN, CNN ANCHOR: Meanwhile, let us check on business for investors, some of whom lost money when WorldCom filed for bankruptcy. They are getting some relief now.
Let's get details on this from Carrie Lee at the Nasdaq market site.

Good morning -- Carrie.

CARRIE LEE, CNN FINANCIAL NEWS CORRESPONDENT: Good morning, Kris. They are getting some relief, but not all investors are satisfied with this. Here are the details.

A federal judge has approved WorldCom's offer to settle its civil fraud charges and this puts the company one step closer to emerging from bankruptcy. Now the troubled telecom, now known as MCI, will pay $500 million in cash and $250 million in stock to shareholders and bondholders. Now WorldCom's payout is the largest ever fined in an accounting fraud case. The accounting fraud totaling some $9 billion. But other -- some people think that this is not enough punishment for the enormity of the crime committed.

Now this all still needs to be approved by a bankruptcy court, but this U.S. district judge says that this is enough of a penalty. The company does plan to emerge from Chapter 11 bankruptcy this fall. They don't want to kill the company outright, Kris, with too much of a fine, but they do want it to be sufficient enough for people to get some of their money back. By the way, the company also cut its financial guidance for 2003 and 2005 -- through 2005, basically citing revenue targets that will be hard to reach because of pricing pressures in this space.

OSBORN: Well, in fact, Carrie, I understand that a number of investors who lost money due to the very scandals last summer, in part due to WorldCom and other companies, are finding and asking for ways to get some money back.

LEE: Right. They -- some people certainly want more money because they're not reaping or getting back all of the money that they lost but merely a percentage of it. So the question is does the company -- should the company be able to emerge at all and continue doing business going forward and that is what this judge seems to be believing.

If I can do a quick check on the futures, actually things are looking pretty flat this morning. Remember we saw a very nice rally yesterday, a lot of people betting on the second half recovery. The Dow gaining 146 points, the Nasdaq up 57. That translates into a 3.5 percent gain yesterday on the technology heavy index. This morning, Kris, we'll hear from Alcoa, the first Dow component to report for the second quarter of the year.

OSBORN: Well then, Carrie, aren't some of the gains due to a boost in e-commerce? Some of the numbers were suggesting that sales by wholesalers were coming in for 2001 at a huge -- at an increase of about 13 percent or so.

LEE: Yes, it's interesting because we are seeing some signs of an economic recovery or certainly that things aren't getting worse, that they're starting to improve. But then remember last week we got a weaker-than-expected reading on the unemployment rate for the month of June. So a mixed bag and a lot of the positives, Kris, people say are already priced into stocks. So we'll see what happens today, but so far things looking pretty flat, as I said.

OSBORN: Thank you very much, Carrie, from the Nasdaq market site.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com