MCI on Tuesday agreed to pay a civil penalty of $500 million in response to fraud charges brought against the carrier by the Securities and Exchange Commission.
The SEC brought civil fraud charges against MCI for misstating $9 billion in revenue. Originally, the SEC wanted MCI to pay $1.5 billion, but the commission approved a $500 million amount as a result of the carrier's pending bankruptcy case.
The money will be distributed to fraud victims pending approval by the District Court hearing the SEC's action against MCI and the Bankruptcy Court handling MCI's bankruptcy case, according to the SEC.
"This settlement recognizes our cooperation with the SEC's investigation, the company's acceptance of responsibility for its past accounting practices, and the significant strides we have made in rebuilding MCI as a model of good corporate governance," said Michael Salsbury, executive vice president and general counsel at MCI, in a statement. "This is an important milestone in our progress to emerge from Chapter 11 on schedule this fall."
MCI's reorganization plan also is pending approval by its creditors. If approved, the company expects to emerge from bankruptcy by September or October, said MCI CEO Michael Capellas. The carrier expects to have significantly less debt, in the range of $4.5 billion to $5.1 billion, than the $30 billion in debt that it claimed upon filing for Chapter 11 protection last July.
MCI also expects to exit bankruptcy with about $1 billion in cash on hand and $350 million in capital leases.