U.S. Rep. Gregory Meeks (D.-N.Y.) Monday urged the federal judge reviewing the WorldCom-MCI settlement with the Securities and Exchange Commission (SEC) to overturn the deal in favor of more stringent remedies. Meeks also said he was working on a “legislative solution” before the settlement becomes a classic example of “how crime does pay.”
Meeks was part of a five-person panel in New York City representing the major stakeholders in the $500 settlement between WorldCom, which now operates as MCI, and the SEC.
“I am very troubled and disappointed with the proposed settlement between the SEC and MCI WorldCom. The settlement agreement is grossly inadequate, a miscarriage of justice, and insulting for the 950,000 New York public sector employees whose pension was victimized by MCI WorldCom’s fraud,” Meeks said.
Admitting no guilt, WorldCom last November agreed to the SEC fine after filing for the largest bankruptcy in U.S. history. The $11 billion accounting scandal originally drew a $1.5 billion fine. The fine, which is to be distributed among WorldCom’s victims, was reduced in light of the bankruptcy proceeding.
“The company is using bankruptcy to re-emerge as a stronger competitor, debt-free with its illegal gains. Reorganization under the bankruptcy laws should not apply when the assets are the product of criminal activities,” Meeks said. “Our bankruptcy laws should not be a vehicle for laundering stolen goods.”
Other speakers Monday included Mark Green, president of the New Democracy Project (NDP); Debbie Goldman, senior policy analyst with the Communications Workers of America (CWA); Rev. Robert Chase, director of the United Church of Christ’s Office of Communication; and James K. Glassman, a resident fellow at the American Enterprise Institute (AEI) and host of TechCentralStation.com.
The CWA and the Church of Christ have been actively campaigning against WorldCom since the scandal first surfaced. CWA was among the very first organizations to call for the debarment of WorldCom from future federal contracts. During the same month, the UCC petitioned the Federal Communications Commission (FCC) for formal rulemaking to prevent future WorldCom-like abuses in the telecommunications industry.
“The $500 million proposed penalty is a slap on the wrist to WorldCom, a company that committed the largest case of corporate fraud in U.S. history,” CWA’s Goldman said. “It provides less than a penny on the dollar to investors who lost $180 billion when WorldCom went bankrupt. This corruption deprived millions of working people and retirees of their retirement income, and cost tens of thousands of workers their jobs. The judge must not rush to judgment before all the facts are in on the depth and breadth of this enormous fraud.”
Chase added, “It is because of a core belief that ‘character counts’ that the Office of Communication of the United Church of Christ has come out so strongly in opposition to the notion that WorldCom, home to the largest accounting scandal in United States history, should be let off the hook with little more than a slap on the wrist. Instead, we believe that, if you are a steward of the Information Age, you are held to a high standard. When you utterly fail to meet that standard — as was so clearly the case with MCI/WorldCom — you don’t get to be an Information Age steward any more.”
The AEI’s Glassman proposed that WorldCom’s assets be sold and the proceeds distributed among the stakeholders.
“This won’t mean that thousands of jobs, millions of customers and billions of dollars’ worth of equipment will disappear into thin air. To the contrary. In a free-market system, the valuable assets of a failed firm (human and physical) move from weak hands to strong hands,” Glassman said.
