Judge Approves MCI's $750M Settlement

The original civil penalty for fraud charges against MCI/WorldCom was $2.25 billion, but the judge approved a settlement in which MCI pays $500 million in cash and $250 million in common stock to shareholders and bondholders when it emerges from Chapter 11 protection.

MCI, Ashburn, Va., overcame another hurdle in its attempt to emerge from bankruptcy when the U.S. District Court approved the $750 million settlement in July.

Stasia Kelly, MCI's general counsel, called the latest ruling a milestone for the company's pending emergence from Chapter 11 protection.

"It represents additional validation of all the positive steps the company has taken over the past year to put its house in order and establish itself as a leader in good corporate governance," Kelly said, in a statement. "We look forward now to completing our confirmation hearing and emerging from Chapter 11 protection."

Also, the battle over allegations that claim MCI rerouted traffic to avoid high access charges continued to be waged between AT&T and MCI this week.

In a filing with the U.S. Bankruptcy Court last week, AT&T, Bedminster, N.J., accused MCI of knowingly and intentionally "dumping" high-cost traffic costs on AT&T.

AT&T contended that MCI sent the traffic to network facilities operated by U.S.-based providers in the Midwest and then out of the country to a Canadian carrier, Manitoba Telephone Systems, which interconnects with Bell Canada, and in turn routed the traffic back to the United States over facilities jointly owned by AT&T and Bell Canada.

In response, MCI Monday said also in a filing that AT&T's objection filing was "baseless and designed to delay and derail MCI's reorganization plan."

MCI also stated that an internal analysis, conducted by law firm Gibson, Dunn & Crutcher LLP, determined that its call termination practices comply with legal and regulatory requirements, adding that AT&T claims against MCI for allegedly rerouting traffic were made "solely for competitive gain."

MCI's filing called AT&T's claims false and asked the court to dismiss AT&T's objections.

On Wednesday, AT&T yet again released a statement that claims MCI attempted to legitimize "the fraud scheme" as least-cost routing.

"Least-cost routing involves availing oneself of the lowest access charge available from the terminating carrier--i.e., shopping for the lowest charges from the terminating carrier," said AT&T in the statement. "That is different in kind from deceptively causing another carrier to pay that terminating access charge."