WorldCom to Adjust Errors to $9 Billion

WorldCom Inc. said Tuesday that it expected to restate more than $9 billion in earnings as it faces additional fraud charges from the Securities and Exchange Commission, which accused the troubled telecommunications company of misleading investors about its financial health since at least 1999.

Clinton, Miss.-based WorldCom said it was in talks with the SEC to settle charges that it committed securities fraud by manipulating its financial records. A settlement deal -- which would impose a nominal fine on WorldCom and require the company to agree not to violate securities laws in the future -- could be announced within a week or two, sources said.

The SEC originally charged WorldCom in June with accounting fraud that totaled $3.9 billion. Since then, the company has said it uncovered an additional $3.3 billion in errors and warned that further adjustments to its financial statements were likely. The SEC’s amended charges cover the additional amount and the expanded time frame of the accounting irregularities.

Officials from WorldCom and the SEC declined to comment.

A settlement would eliminate a major legal problem plaguing WorldCom, which filed for bankruptcy protection in July. It also would give it a greater chance of reemerging as a viable company, legal and financial experts said.

“It’s a critical prerequisite for its survival,” said James Owers, professor of finance at Georgia State University and an expert on corporate restructurings. “If they don’t come to terms with the SEC, then many parties essential to the survival of WorldCom as a workable entity will not be playing along.”

A settlement also would reduce the threat that the company itself -- rather than just a few former executives -- would be indicted, the sources said.

WorldCom still faces shareholder lawsuits and congressional and Justice Department investigations.