United States Securities and Exchange Commission
Litigation Release No. 18451 / November 10, 2003
Accounting and Auditing Enforcement Release No. 1909 / November 10, 2003
Former SEC Chairman Richard Breeden to Supervise Distribution of SEC's Civil Penalty Against WorldCom
Former SEC Commissioner J. Carter Beese, Jr. to Oversee Stock Portion of the Distribution Fund
Securities and Exchange Commission v. WorldCom Inc., Civil Action No. 02-CV-4963 (SDNY) (JSR)
The Securities and Exchange Commission announced that on November 7, 2003, the Honorable Jed S. Rakoff, United States District Judge, issued an Order appointing former SEC Chairman Richard C. Breeden, who is currently serving as WorldCom's court-appointed Corporate Monitor, to be the Distribution Agent to supervise the distribution of the SEC's civil penalty judgment against WorldCom. The SEC obtained the civil penalty judgment pursuant to a settlement approved by Judge Rakoff on July 7, 2003. (Litigation Release No. 18219). Also on November 7, 2003, Judge Rakoff appointed former SEC Commissioner J. Carter Beese, Jr., to be the Equity Manager to oversee the stock portion of the distribution fund.
The Court's selections of Mr. Breeden as Distribution Agent and Mr. Beese as Equity Manager are the first steps in the Fair Fund distribution process for the SEC's civil penalty judgment. Future steps include WorldCom's payments into the distribution fund and the SEC's submission of a formal distribution plan to the District Court. These future steps are scheduled to take place at or around the time WorldCom emerges from bankruptcy court protection. After the District Court approves a distribution plan, the Distribution Agent will commence the process of identifying eligible investor claimants and processing claims for payment from the distribution fund.
WorldCom, which is now doing business under the MCI brand name, filed for bankruptcy court protection on July 21, 2002. On October 31, 2003, the Bankruptcy Court approved the company's plan of reorganization. The Commission staff anticipates that the plan will become effective within a few months, resulting in WorldCom's emergence from bankruptcy court protection. Because WorldCom was in bankruptcy reorganization, the SEC's settlement of its claims for civil penalties was reviewed and approved by both the District Court and the Bankruptcy Court. (Litigation Releases Nos. 18219 and 18277).
The SEC's civil penalty judgment against WorldCom provided that WorldCom was liable for a civil penalty in the amount of $2,250,000,000. It further provided that, in the event of confirmation of a plan of reorganization of WorldCom by the Bankruptcy Court which occurred on October 31, 2003 WorldCom's obligation to the SEC shall be satisfied by the company's payment of $500,000,000 in cash and its transfer of common stock in the reorganized company having a value of $250,000,000, on the effective date of its plan of reorganization. Under the terms of the settlement, the funds paid and the common stock transferred by WorldCom to satisfy the SEC's judgment will be distributed to investor victims of the company's fraud, pursuant to Section 308 (Fair Funds for Investors) of the Sarbanes-Oxley Act of 2002. Additional information regarding the Fair Fund distribution of WorldCom's civil penalty is available on the Commission's website.
The Commission's investigation into the events surrounding the WorldCom fraud is continuing.