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MCI reclaims tax on false earnings

May 02, 20032 mins
Financial Services IndustryWi-Fi

MCI has received hundreds of millions of dollars back in taxes paid when it was still called WorldCom and wildly overinflated its earnings, leading to the largest bankruptcy in U.S. history and an ongoing investigation, a company spokeswoman confirmed Friday after a published report appeared in The Wall Street Journal.

“As part of cleaning up the past and obtaining money that was due to our creditors, we have received back under $300 million,” the spokeswoman said. “That is all we will receive. It’s a closed matter for us.”

The Journal story quoted an unnamed “person close to the situation” saying that MCI has been refunded nearly $300 million by the Internal Revenue Service (IRS), and could seek more in taxes it paid on earnings that didn’t exist. But the company is not seeking an additional refund in taxes, the spokeswoman said Friday afternoon.

The former WorldCom overstated earnings for three years for a total of what has publicly been revealed to be about $7 billion. Accounting irregularities at the company, however, could reach $9 billion to $11 billion, the Journal has reported.

In an attempt to distance itself from the accounting scandal and clean up its tarnished image as it prepares to emerge from bankruptcy in September, WorldCom last month changed its name to MCI. After WorldCom acquired MCI Communications in 1998, the company for a time used both names. Besides changing its name, WorldCom also moved its headquarters from Clinton, Miss., to Ashburn, Va.

Qwest Communications International also will probably ask the IRS for a refund on taxes it paid on overstated revenue, the Journal said. Qwest has announced that they would restate $2.2 billion in revenue for 2000 and 2001 as a consequence of accounting irregularities.