US Bankruptcy Court Judge Arthur Gonzalez has approved MCI's Plan of Reorganisation, effectively setting the stage for the company's emergence from Chapter 11.

The revamped group, formerly known as WorldCom, has been allowed to wipe out $35bn in debt.

Michael Capellas, chairman and chief executive at MCI, stated: "This is a great day for MCI. Against all odds, we have reached our confirmation faster than anyone expected."

But the decision was far from universally welcomed. US pressure group the Council for Citizens Against Government Waste (CCAGW) slammed the settlement for only paying "most creditors 36 cents on the dollar and allowing MCI to discard $35bn in debt".

CCAGW president Tom Schatz said in a statement: "The company committed the largest fraud in history and has been suspended from federal contracts.

"MCI continues to con the public with its claims of reform and commitment to sound accounting practices."

The pressure group claimed that its one million members "are particularly incensed" by the federal government's granting of seven waivers to its suspension from federal contracts, worth $100m to MCI, after the suspension was issued by the General Services Administration.

"A suspension should mean what it says, rather than turning into a loophole-filled, empty gesture by the government," declared the CCAGW.

"Certainly, the Pentagon can find alternatives to MCI despite claims that national security is at stake if the company does not continue working on certain projects.

"For any of the government's needs, there must be more than one contractor able to perform the work. This is especially true in telecoms [which is] a highly competitive sector of the economy."