A court examiner accused accounting firm KPMG of helping WorldCom avoid paying hundreds of millions of dollars in state taxes.
Dick Thornburgh, said in his report to a Manhattan bankruptcy court, that WorldCom may have avoided paying $100 million to $350 million in state taxes with the help of a KPMG-designed strategy that the long-distance and data services company still uses.
Thornburgh also said MCI, as WorldCom has been renamed, was at liberty to sue KPMG for giving it this advice.
The tax strategy let WorldCom to move income from high-tax states to lower-tax ones, Thornburgh said in his report.
KPMG, however, defended the strategy, saying it was helping its client to reduce double taxation at the state level.
“The Examiner's conclusions are simply wrong,” KPMG said.
The report also said that MCI can sue former CEO Bernie Ebbers, Citigroup and its accountants for their roles in its $11 billion accounting scandal.
MCI said its tax strategy was appropriate and it had no plans to pursue claims against KPMG.
“The company is reviewing and considering the potential causes of action against outside parties discussed in the examiner's report,” Stasia Kelly, MCI's general counsel, said in a statement.