"This is the first unintended effect of Sarbanes-Oxley," says David Skeel, U.Penn. Law School professor, in an article in Forbes: "Feel Good Justice" that reports on WorldCom's agreement with the S.E.C. to pay $500 million that will go to the benefit of shareholders.
The money will come out of creditor's pockets, turning upside down the usual process of bankruptcy in which shareholders take last only after impaired creditors are satisfied. Elizabeth Warren, a bankruptcy authority at Harvard Law, told Forbes "The notion that they [shareholders] cheated themselves and should be paid ahead of creditors makes no sense."
Forbes says that the deal is not expected to be blocked by the bankruptcy court overseeing WorldCom's reorganization, because the S.E.C. started out with a $1.5 billion demand, and got the creditor's committee to assent to the reduced penalty sum.Posted by dougsimpson at June 7, 2003 08:34 PM | TrackBack