NEW YORK -- WorldCom Inc. has agreed to pay investors a record $500 million to settle civil fraud charges over its $11 billion accounting scandal, which was the biggest in U.S. corporate history, lawyers for the company and the federal government announced Monday. The fine would be by far the largest the Securities and Exchange Commission has ever imposed. WorldCom, a bankrupt telecommunications titan that wants to be renamed MCI, is accused of falsifying balance sheets to hide expenses and inflate earnings. Attorneys for the two sides presented the proposed settlement to U.S. District Judge Jed S. Rakoff in Manhattan, who said he would consider the deal and would not rule before June 11. Rakoff said he needs to learn "much more of the defendant's seemingly massive fraud," who would be affected by the settlement and what internal controls WorldCom has put in place. The settlement actually calls for WorldCom to be fined $1.51 billion, an amount that would be reduced to $500 million as part of the company's bankruptcy case, in which many creditors have to settle for less money than they are really owed. Even so, the $500 million would surpass the $150 million fine the SEC slapped on Citigroup's Salomon Smith Barney as part of an industrywide settlement of allegations that Wall Street firms warped their stock ratings to lure investment-banking business. The WorldCom penalty also would dwarf the largest accounting fraud settlements to date, the $10 million fine the SEC levied on Xerox Corp. in 2002 and the $7 million paid by now-fallen Arthur Andersen LLC in 2001 over its audit of Waste Management. The SEC and WorldCom had been negotiating the settlement for months, and the deal would be an important development for WorldCom's hopes of emerging from bankruptcy as early as September. "It was only last summer that we were wondering whether they would even survive," telecom analyst Jeff Kagan noted in a written commentary yesterday. "Now with the settlement at hand, they can put this chapter behind them." The proposed settlement calls for WorldCom to put $500 million into a fund for investors who were victimized by the company's fraud, though the exact process has yet to be determined. WorldCom's stunning collapse and bankruptcy wiped out nearly $180 billion in shareholder wealth. A group of former WorldCom employees that is critical of the company denounced the accord as a "slap on the wrist." The $500 million is equivalent to "about one week of revenue ... -- an insignificant amount by any standard," said the group, BoycottMCI.com. The group's founder, Mitch Marcus, said the accounting scandals that leveled Enron Corp. and Arthur Andersen "pale in comparison" to "the degree of illegality" at WorldCom. The SEC sued WorldCom last June, just a day after the company disclosed $4 billion in financial misstatements, shocking a market already buffeted by the revelations of accounting violations at Enron. Since then, WorldCom has widened the hole in its books to around $7 billion, then $9 billion and eventually $11 billion. The SEC determined that WorldCom had misled investors starting at least as early as 1999. The SEC and WorldCom reached a partial settlement in late November in which the company agreed to a permanent injunction barring it from future violations of securities laws. In addition, WorldCom executives agreed to submit to ethics training, and the duties of the company's court-appointed watchdog were expanded. While the agency has pursued civil charges against WorldCom and several former top executives, the Justice Department has been conducting a criminal investigation and has charged several former executives. WorldCom's ex-controller, David Myers, and its former chief financial officer, Scott Sullivan, were arrested last August. Prosecutors alleged that the two directed employees to conceal more than $3.8 billion in expenses in financial reports, causing WorldCom earnings to be overstated by $5 billion. Myers pleaded guilty in federal court in Manhattan in September and is cooperating with prosecutors in the criminal probe. Sullivan -- the nation's highest-paid CFO in 1997, earning $19 million -- has denied any wrongdoing. He is free on $10 million bail. Three other WorldCom executives have pleaded guilty to similar federal charges. Ousted WorldCom CEO Bernard Ebbers, who has not been charged, last month failed to make his first payment of around $25 million on more than $400 million in loans that he owes the company. WorldCom was among the fastest-growing and most aggressive players in the late 1990s telecom and Internet boom. After being hurt by the wider telecom industry slump and ravaged by its own accounting scandal and bankruptcy, WorldCom cut its work force to 55,000 from a peak of 80,000. It remains second only to AT&T Corp. in the long-distance market and is a major carrier of data over the Internet. In addition to changing its name to MCI to reduce the taint associated with WorldCom, the company also plans to move its headquarters from Clinton, Miss., where WorldCom was founded, to Ashburn, Va., near MCI's base in the suburbs of Washington, D.C. It hired a new CEO and chairman, former Compaq Computer Corp. chief Michael Capellas, in November.