On the eve of trial (set to begin on March 17), Bank of America (NYSE: BAC) has announced the preliminary settlement of the claims brought against it as part of the WorldCom securities class action pending in the S.D.N.Y. Bank of America is accused of failing to engage in proper due diligence while acting as an underwriter for WorldCom bond offerings. The settlement is for $460.5 million and was calculated, according to press reports, using the same formula applied by Citigroup in reaching its earlier settlement in the case.
The settlement has received wide-spread media attention, including articles in today’s New York Times and Washington Post.
Quote of note (New York Times): “A lawyer involved in the case said that a half-dozen smaller banks had expressed an interest in settling with the New York fund [which acts as lead plaintiff in the case]. This person said that the fund was likely to insist that at least some of the remaining banks pay a premium over the formula used by Citigroup and Bank of America in their settlements. J. P. Morgan Chase is perhaps the most vulnerable of the remaining defendants because it sold a large portion of the bonds offered by WorldCom in 2000 and 2001.”
Addition: The settlements by defendant banks in the WorldCom case are now coming fast and furious. Today it was announced that Lehman Brothers Holdings, Inc., UBS AG, Goldman Sachs Group, Inc., and Credit Suisse Group have agreed to pay a combined $100.3 million to settle the claims against them. These settlements are also based on the Citigroup formula. Bloomberg has a report.