Tax

MCI Settles an Old State Tax Bill

Mississippi will also take possession of several properties located in downtown Jackson, including the old WorldCom headquarters.
Stephen TaubMay 10, 2005

MCI Inc. is still paying for the deeds of the executives who ran the company when it was called WorldCom.

The telecom has agreed to pay $100 million to Mississippi to settle what public officials alleged was a scheme by WorldCom to defraud the state of taxes, according to an announcement from state Attorney General Jim Hood.

Hood stated that under the settlement, the state will also take possession of several company properties located in downtown Jackson, including the old WorldCom headquarters. According to Hood’s announcement, the headquarters building, parking lots, and several smaller buildings have been for sale with a “negotiating price” of $7 million but might be used for state office space.

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MCI is now headquartered in Ashburn, Virginia.

Hood also announced that as a gesture of goodwill, MCI agreed to fund the Children’s Justice Center of Mississippi, which provides physical and mental care for abused children as well as the services of specialized prosecutors and investigators. That funding amounts to $4.2 million, according to Reuters. The wire service also noted that the telecom agreed to pay $14 million in legal fees.

“This agreement benefits MCI and the state of Mississippi, allowing us to put this issue behind us in a fair and equitable manner,” Carol Ann Petren, MCI’s deputy general counsel, said in an e-mailed statement, reported the Associated Press.

Hood also asserted that Mississippi is seeking $900 million from KPMG, which replaced Arthur Andersen LLP as WorldCom’s auditor shortly before the company collapsed, according to the AP. The Big Four firm maintained that it provided “sound and appropriate tax advice” as part of the company’s restructuring, the wire service reported. “MCI/WorldCom was ultimately responsible for deciding whether, and how, to implement that advice,” KPMG spokesman George Ledwith said in a statement, added the AP.

Reuters also noted that while Mississippi had the largest state tax claim against MCI, since WorldCom was once headquartered there, at least 14 other states and the District of Columbia are in ongoing settlement talks with the telecom over back taxes.

Meanwhile, published reports have speculated that Qwest Communications may weigh in with a new bid for MCI in an effort to top Verizon Communications’ offer. According to MarketWatch, Qwest chief financial officer Oren Shaffer met with MCI investors late last week, but Qwest spokeswoman Claire Mylott told the website that while the company is keeping its options open, “we have no plans to do anything further.”