WorldCom Directors Settle Lawsuit
Ten former outside directors of WorldCom Inc. have reached a $54-million agreement to settle part of a shareholder lawsuit over accounting fraud that led to the largest bankruptcy case in U.S. history.
Max Bobbitt, a former chairman of WorldCom’s audit committee, said Wednesday that a group of directors had reached a settlement with investors. Sean Coffey, a lawyer for shareholders, said part of the settlement would be paid by the directors themselves.
“We’ve settled with the directors for $54 million, two-thirds insurance, one-third out of their pockets,†said Coffey, a lawyer for the New York Common Retirement Fund, the lead plaintiff in the lawsuit.
Citigroup Inc. agreed in May to pay $2.6 billion to resolve fraud claims filed by WorldCom investors. Citigroup’s brokerage division was a key backer of WorldCom securities.
David Neustadt, a spokesman for New York Comptroller Alan Hevesi, who serves as a trustee for the Common Retirement Fund, said he couldn’t confirm that there was a settlement with outside directors.
MCI Inc. spokesman Peter Lucht declined to comment. WorldCom was renamed MCI after emerging from bankruptcy protection in April.
Ashburn, Va.-based WorldCom filed for protection in July 2002. Former WorldCom Chief Executive Bernard J. Ebbers is scheduled to go on trial this month for his alleged role in the $11-billion accounting fraud. He has pleaded not guilty.
The latest settlement includes all but two of WorldCom’s former outside directors: Bert Roberts and Francesco Galesi, who remain defendants in the lawsuit, the Wall Street Journal reported on its website.
The former directors settling are James C. Allen, Judith Areen, Carl J. Aycock, Max E. Bobbit, Clifford L. Alexander, Stiles A. Kellett Jr., Gordon S. Macklin, John A. Porter, Lawrence C. Tucker and the estate of John W. Sidgmore, who died in 2003.
