MCI is struggling to put the WorldCom scandal behind it

WorldCom gained notoriety in 2002 when it admitted to inflating profit reports by illegally booking expenses.

The scandal was a contributing factor to a slide in world equity markets, knocking billions off stock values.

Leucadia, which already has telecoms and healthcare holdings, is hoping for approval to buy at least 50% of MCI.

Fightback

This is the first takeover interest in MCI since it shocked the US business community by disclosing an $11bn hole in its accounts, plunging the group into Chapter 11 bankruptcy protection.

It was the largest bankruptcy the world had ever seen.

The company, which provides voice, internet and data communications to 20 million customers in 65 countries, finally emerged from bankruptcy in April 2004 having changed its name from WorldCom to MCI.

But the US's second biggest long-distance phone company has struggled to regain a footing in a market riddled with price wars, and where customers have greater bargaining power in a wider market.

Recently, the Virginia-based company said it had lost $388m in its first quarter and would be cutting another 7,500 jobs.

Lawsuit

Meanwhile, MCI is suing its former chief executive Bernard Ebbers for $408m that the company claims it loaned him over two years.

The suit also seeks to void Mr Ebbers' severance deal which promised him a lifetime pension of $1.5m a year, an office and computer, and use of the company jet.

Mr Ebbers was forced to quit WorldCom in April 2002 after the loans became public - three months before the company filed for bankruptcy protection.

After he resigned the loans were restructured and he was allowed to repay them over five years, but he missed the first $25m payment in April 2003.

The loans were originally granted because Mr Ebbers had used more than 5.7 million shares of WorldCom stock as collateral for bank loans he needed to buy two yachts, a ranch and interest in timber companies.