US State Squares Up to MCI.

MCI says it will co-operate with Oklahoma's attorney general following his decision to prosecute the company and six former employees for deliberate securities fraud.

However, the company warned yesterday that attorney general Drew Edmondson's crimnal action would only punish MCI's 20 million customers and 55,000 employees.

In a statement released by MCI general counsel Stasia Kelly, the company added it does not believe Edmondson's action will impact MCI's bankruptcy process.

The statement was issued after Oklahoma launched the first state criminal action against WorldCom. The suit also names six employees, including former CEO Bernie Ebbers and CFO Scott Sullivan.

The 15 count complaint alleges the company and former executives falsified company information that is relied upon when buying securities to defraud investors, and engaged in a course of business that operated as a fraud.

"We allege the company and these six employees executed a scheme to artificially inflate the value of WorldCom stock and bonds by intentionally falsifying information filed with the Securities and Exchange Commission (SEC)," Edmondson said.

Oklahoma state pension funds are reported to have lost $64m through WorldCom's collapse.

A lawyer for Ebbers is reported to have said Oklahoma's complaint contained no specific evidence of wrong doing by the former CEO and expects Ebbers to be "fully exonerated."

News of the action came a day after MCI's US court-appointed corporate monitor, Richard Breeden, published a reporting outlining 78 recommendations for changes in corporate governance to prevent what he called "cronyism" and "compensation abuses" of past executives, and install a system of corporate checks and balances.