Four Investment Banks to Pay $100.3 Million to Settle WorldCom Suit
By Eileen Alt Powell
The Associated Press
Four investment banks on Friday became the latest to settle claims stemming from a class action lawsuit brought by former shareholders of WorldCom Inc.
Alan G. Hevesi, New York state's comptroller, said in a statement that he had reached an agreement with Lehman Brothers Inc. of New York for $62.7 million. Three other investment banks each agreed to pay $12.54 million. They are Credit Suisse First Boston, a unit of the Zurich-based Credit Suisse Group; Goldman, Sachs & Co. of New York, and UBS Warburg LLC of Stamford, Conn.
All four participated as underwriters in WorldCom's May 2000 bond offering, Hevesi said. He has been the lead plaintiff in the suit.
On Thursday, Bank of America Corp., which is headquartered in Charlotte, N.C., agreed to pay $460.5 million for its role in bond sales before WorldCom collapsed in 2002 amid allegations of an $11 billion accounting fraud. Late last year, Citigroup Inc., the nation's largest financial institution, paid $2.58 billion to settle its share of the class action suit.
Friday's announcement came as a jury began deliberations in the fraud trial of former WorldCom Inc. chief Bernard Ebbers, accused of orchestrating the accounting scheme that drove the telecommunications company into bankruptcy. WorldCom has since emerged from bankruptcy as MCI Inc.
The suit was brought against former officers and directors of WorldCom; the company's accountant, Arthur Andersen LLP; and more than a dozen banks and brokerage firms that were underwriters of WorldCom bonds.
The investors claimed the defendants should have been aware of ongoing fraud at WorldCom.
Among the institutions that haven't yet settled are JPMorgan Chase & Co., the nation's second largest financial institution which is based in New York. Divisions of a number of foreign banks, including Frankfurt-based Deutsche Bank AG, and Amsterdam-based ABN AMRO Bank, also haven't settled.
In announcing the settlement, Hevesi said "we commend these four investment banks for putting this issue behind them."
He added that his office was "willing to talk with other defendants about potential settlements" but otherwise would pursue the case in court starting March 17.
The agreement was announced after the close of trading on Friday. Lehman Brothers shares rose $2.02, or more than 2 percent, to close at $93.02 on the New York Stock Exchange. Credit Suisse Group's shares were up 98 cents, or more than 2 percent, at $45.13, and Goldman Sachs shares advanced $2.12, or 1.9 percent, to $111.53, also on the Big Board.