The judge denied a motion by 14 states to bar KPMG from continuing as MCI's auditor and ordered the company to resume payments to the firm, WebCPA reported.

In March this year, 14 states, led by Massachusetts, called for KPMG to be disqualified as WorldCom's auditor and requested that KPMG give up $146m fees that it received or applied for from the company,

MCI's payments to KPMG had been suspended since the states filed their complaint.

The states alleged that KPMG advised WorldCom on a tax strategy that helped it evade taxes by claiming billions in improper royalty expense deductions. The states, which are seeking millions in back taxes, had argued that since WorldCom has a potential claim against KPMG stemming from the royalty plan, KPMG had a financial interest in the company's affairs.

But judge Arthur J Gonzalez disagreed: 'The court concludes that KPMG does not hold an interest adverse to the estate and that KPMG is disinterested.'