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New York State Comptroller Alan Hevesi Says WorldCom Board Members Agree to $20.25 Million Settlement
NEW YORK (AP) -- Eleven former board members of WorldCom Inc. have agreed to pay $20.25 million of their own money to settle a lawsuit by former investors in the company, New York State Comptroller Alan Hevesi said Friday.
The deal follows a federal judge's preliminary approval of another plan under which JPMorgan Chase & Co. will pay $2 billion to settle a class-action lawsuit brought by former WorldCom investors.
The settlement with the 11 board members, which a judge must still approve at a hearing expected next week, represents more than the members were paid during their tenures, Hevesi's office said in a statement.
Under the deal, insurance companies who wrote policies for the board members will pay investors an additional $35 million, bringing the total settlement to $55.25 million, Hevesi's office said.
It is rare for directors of public companies to have to pay settlements in class-action cases out of their own pockets. Insurance policies paid for by the companies usually cover all financial liabilities resulting from their work.
A message left for Paul Curnin, lead lawyer for the directors, was not immediately returned.
Hevesi, who acts as the sole trustee of the New York State Common Retirement Fund, is the lead plaintiff in lawsuits investors have filed against WorldCom, its board members and former chairman, its former banks and its former auditor, Arthur Andersen, which went under following another accounting fraud scandal involving its auditing of Enron.
The investors have argued that financial institutions that underwrote or traded WorldCom securities, along with the board members and auditor Arthur Andersen, should have been aware of ongoing fraud at the company.
Earlier Monday, Judge Denise Cote gave preliminary approval to the $2 billion JPMorgan Chase agreement. With that deal, investment banks -- including Citigroup Inc. and Credit Suisse First Boston -- have agreed to pay about $6 billion in settlements.
The settlements with the banks freed Hevesi to revive the agreement with the board members, which was reached earlier this year but then rescinded to avoid weakening a possible verdict against the banks if that case had gone to trial.
"We are delighted that with last of the bank settlements, we can now revive this historic settlement," Hevesi said in a statement.
The 11 board members also agreed to cooperate with the investors in the ongoing lawsuits against the remnants of Arthur Andersen and WorldCom's former chairman, Bert Roberts.
WorldCom collapsed in an $11 billion accounting fraud in 2002. Former CEO Bernard Ebbers faces up to life in prison after he was convicted Tuesday of orchestrating the fraud. |
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