Former WorldCom investors can now claim back some of the billions of dollars they lost in a massive accounting fraud, after a federal judge in New York approved legal settlements of “historic proportions.”
The deal approved this weekby U.S. District Judge Denise Cote will divide payments of $6.1 billion among approximately 830,000 people and institutions that held stocks or bonds in the telecommunications company around the time of its collapse in 2002.
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.
As part of the settlement ruling, the judge approved a supplemental plan to let investors who sold their WorldCom stock prior to January 2002 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 lawsuit.
John P. Coffey, a lawyer for the investors, said payouts were unlikely to begin before next summer because it would take that long to determine how much money each claim is worth.
“Now that we have the formula approved, we’ll turn to processing the claims and make every effort to get this money distributed as fast as humanly possible,” he said.
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 and a $2 billion payment by JPMorgan Chase & Co. Investors claim the companies, which were among those that underwrote or traded WorldCom securities, should have been aware of the fraud.
The judge said the settlements were “of historic proportions.”
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.
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.
Copyright 2005 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Topics Fraud Legislation
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