The Associated Press has a report on yesterday’s opening statements in the trial of the securities class action against Arthur Andersen based on WorldCom-related claims. As previously posted, the other defendants in the case have settled.
Category Archives: WorldCom
Finding jurors that do not have strong feelings about the WorldCom corporate scandal may prove difficult for the company’s former auditors. Arthur Andersen is the last remaining defendant in the WorldCom securities class action and the case is about to go to trial. According to a Bloomberg report, counsel for Arthur Andersen has informed the judge that many of the individuals in the jury pool “owned WorldCom stock while others displayed ‘deeply felt’ bias against Andersen and WorldCom.” Jury selection begins on Monday and the trial is expected to last until the end of May.
As of today, all of the former directors sued in the WorldCom securities class action pending in the S.D.N.Y. have agreed to settle the case. The twelve board members will pay $60.75 million ($24.75 million in personal payments and $36 million from their insurers), bringing the total settlements in the case to slightly over $6 billion. The last remaining defendant is Arthur Anderson. The Associated Press has a report.
JPMorgan Chase & Co. (NYSE: JPM) 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. JPMorgan is accused of failing to engage in proper due diligence while acting as an underwriter for WorldCom bond offerings and is the last of the defendant banks in the case to settle. The settlement is for $2 billion.
Bloomberg reports that JPMorgan will pay a significant premium (more than 17.5%) over the formula used to establish Citigroup’s related settlement. Taken together, the WorldCom securities class action settlements now total approximately $6 billion.
Three more banks have agreed to a preliminary settlement of the claims brought against them as part of the WorldCom securities class action pending in the S.D.N.Y. Deutsche Bank AG, WestLB AG, and Caboto Holding SIM Spa will pay a total of $437.5 million based on their roles as underwriters for WorldCom bond offerings.
Bloomberg reports that the premium over the formula used to establish Citigroup’s settlement continues to rise as the case gets closer to trial. The current group of settling banks are paying a 13%-17.5% premium.
Taken together, the WorldCom securities class action settlements now total just under $4 billion.
Four more banks have agreed to a preliminary settlement of the claims brought against them as part of the WorldCom securities class action pending in the S.D.N.Y. ABN Amro, Mitsubishi Securities International, BNP Paribas Securities, and Mizuho International, who are accused of failing to engage in proper due diligence while acting as underwriters for WorldCom bond offerings, will pay a total of $428.4 million.
These are the latest in a string of settlements by defendant banks just prior to trial. While the earlier settlements were all calculated using a formula pioneered by Citigroup’s settlement, Bloomberg reports that this group of banks is paying a 5%-13% premium.
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.
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.
Less than a month after it was announced, the settlement by ten former WorldCom outside directors of the securities class action claims against them has collapsed. The settlement was for $54 million, but it was the fact that $18 million of that sum was to be paid personally by the directors that led to extensive media commentary. According to an article (subscrip. req’d) in the Wall Street Journal, District Judge Cote (S.D.N.Y.) “rejected a provision that relates to how much the remaining defendants in the suit might have to pay if they lose the case.” Without that provision, the plaintiffs have chosen to withdraw from the settlement.
Ten former outside directors of WorldCom have agreed to a preliminary settlement of the WorldCom securities class action claims against them. The settlement is for $54 million. Notably, $18 million of that sum will be paid personally by the directors (with the rest covered by insurance). According to an article in the Washington Post, the $18 million figure represents more than 20% of the directors’ combined net worth.
Quote of note: “‘This is a watershed development by imposing personal liability on corporate directors beyond the scope of insurance coverage,’ said WorldCom’s court-appointed corporate monitor, Richard C. Breeden, former chairman of the Securities and Exchange Commission. ‘It will send a shudder through boardrooms across America and has the potential to change the rules of the game.'”
Last week, Judge Denise Cote of the S.D.N.Y. denied most of the summary judgment motion brought by the underwriter defendants, including Bank of America Corp. and J.P. Morgan Chase & Co., in the WorldCom securities litigation. The banks had underwritten bond offerings made by WorldCom in 2000 and 2001.