Category Archives: WorldCom

It’s Good To Be The Kings

Business Week (May 16, 2005 edition) has a feature article profiling the plaintiffs’ counsel who handled the WorldCom securities class action. The article is entitled “The Kings of Class Actions.”

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Arthur Andersen Settles WorldCom-Related Claims

Arthur Andersen LLP, the last remaining defendant in the WorldCom securities class action, has agreed to settle the case. The settlement ends the the ongoing trial in the S.D.N.Y. According to a New York Times article, the settlement is for $65 million plus “20 percent of any amount [Arthur Andersen] paid to distribute its remaining capital to its present and former partners.” The settlement also reportedly includes a “most favored nation clause” that guarantees the plaintiffs “the difference between the $65 million and any larger settlement in any other lawsuit [Arthur Andersen] may settle in the future.”

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The Economics Of Securities Class Actions

The New York State Common Retirement Fund’s (the “Fund”) decision to act as lead plaintiff in the WorldCom securities class action has come under fire. The case has resulted in over $6 billion in settlements by the investment banks that underwrote WorldCom’s bonds. Some commentators have argued, however, that the settlements actually lowered the value of the Fund’s investments in those investment banks by more than the amount the Fund will receive from the settlements. In chronological order:

(1) Wall Street Journal editorial (subscrip. req’d) in the April 1 edition.

(2) Letter to the editor (subscrip. req’d) by Alan Hevesi, New York State Comptroller, in response to the Wall Street Journal editorial.

(3) New York Sun editorial in the April 12 edition.

(4) Forbes column in the April 25 edition.

Quote of note (Forbes): “Judging by a plaintiff expert’s own estimate of shareholder losses, New York’s claim of a $317 million hit would entitle it to 1.1% of the kitty, or a mere $11 million . . . . Hevesi’s suit cost New York’s pension fund by deflating the value of its investments in the banks it sued. The Hevesi fund owns stakes in J.P. Morgan, Citigroup and BofA. These three banks took aftertax charges totaling $3.2 billion for WorldCom settlement costs. The fund’s pro rata share of these losses, and those of smaller-fry defendants, totes up to $13 million.”

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Trial Of Ex-WorldCom Auditor Begins

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.

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Getting A Fair Trial

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.

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Ex-WorldCom Directors Settle

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.

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Make That $6 Billion And Counting

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.

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