Judge approves $6.1 billion in WorldCom settlements
Wednesday, September 21st 2005, 1:09 pm
By: News On 6
NEW YORK (AP) _ A federal judge Wednesday approved legal settlements that will return more than $6.1 billion to investors who suffered losses in the massive WorldCom Inc. accounting fraud.
The deals, approved by U.S. District Judge Denise Cote, will divide payments among approximately 830,000 people and institutions that held stocks or bonds in the telecommunications company around the time of its collapse in 2002.
The judge said the settlements were ``of historic proportions.''
Money for the payouts will come from a long list of defendants, including investment banks, auditing firms and former WorldCom CEO Bernard Ebbers, who was convicted of fraud earlier this year and sentenced to 25 years in prison.
Under the settlement, Ebbers will give up many of his personal assets, including a multimillion-dollar home in Mississippi and his interests in a lumber company, a marina, a golf course, a hotel and several thousand acres of timberland.
The largest chunks of the settlements were a previously approved $2.58 billion payment by Citigroup Inc. and a $2 billion payment by JPMorgan Chase & Co. Investors said the companies, which were among those that underwrote or traded WorldCom securities, should have been aware of the fraud.
Attorneys for the plaintiffs reached the settlement deals independently with the various defendants over the past year, but needed a judge's permission to begin collecting payments.
But lawyers involved in the case said many investors will be getting back only a fraction of what they lost in the company's collapse.
The government accused WorldCom officials of committing an $11 billion fraud by making adjustments to the company's financial statements to give investors a misleading picture of the company's performance.
WorldCom declared bankruptcy and is now operating under the name MCI.
As part of the settlement ruling, the judge approved a supplemental plan to allow investors who sold their WorldCom stock prior to January 2002 to receive compensation at a discounted rate.
``We're glad it's approved,'' said David Neustadt, a spokesman for New York State Comptroller Alan G. Hevesi, who was a lead plaintiff in the investor suit.
Lawyers involved in the case did not immediately respond to calls for comment.