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It's payday for victims of WorldCom's accounting fraud.
Stephen Taub, CFO.com | US
June 15, 2007
The Securities and Exchange Commission has distributed more than $500 million to WorldCom investors as restitution for the company's accounting fraud, it announced yesterday. Another $250 million will be distributed later this year upon a final court resolution of any contested claims, notes Richard C. Breeden, the SEC's distribution agent for its Fair Fund, an account set up to hold penalty payments.
During the past four years, the commission has returned nearly $2 billion to investor victims, according to SEC chairman Christopher Cox. "I anticipate substantial additional distributions to investors in the near future," he added in a press release. "The distribution is an important chapter in our enforcement efforts against WorldCom and the individuals at the center of the massive fraud at that company," said Peter H. Bresnan, deputy director of the SEC's Division of Enforcement in a statement.
Section 308 of the Sarbanes-Oxley Act allows the SEC to seek court approval to distribute civil penalties along with disgorgement to victims of securities fraud. Prior to 2002, all civil penalties obtained by the SEC in securities enforcement actions were deposited in the general fund of the U.S. Treasury.
The commission sued WorldCom on June 26, 2002, the day after the company disclosed it had made misstatements on its financial statements for the preceding five fiscal quarters. In July 2003, the U.S. District Court for the Southern District of New York entered a final judgment ordering WorldCom to pay a $750 million civil penalty. The SEC requested that the penalty be placed in the Fair Fund for the benefit of WorldCom's investor victims.