Report: WorldCom Class-Action Accord Near
Page 1 of 1
Ten former outside directors for WorldCom (now MCI) are reportedly finalizing a $54 million settlement with investors hurt by the company's accounting fraud during the telecom and dot-com stock frenzy of the late 1990s.
The deal calls for the former board members to pay $18 million of their own money, with the remainder covered by the company's insurers, according to a story in today's Wall Street Journal.
Lawyers for the New York Common Retirement Fund, and other plaintiffs in the case, accused directors of violating securities laws by giving false statements about WorldCom's financial picture.
By agreeing to the settlement, the former board members are raising the level of accountability and potential liability for outside directors, the report noted.
A formal court filing of the agreement between plaintiffs and investors could come as early as today, the Wall Street Journal reported. Under the final pact, the directors are not expected to admit any wrongdoing. Two other former directors are not part of the settlement.
Richard Breeden, a corporate monitor appointed by a bankruptcy court to put WorldCom back on ethical footing after its accounting problems began to unravel into a historic bankruptcy filing, once said that WorldCom chief Bernie Ebbers was "as incompetent and unqualified to be a CEO as anyone who has ever held that post."
He also harshly criticized directors, saying they gradually ceded power to Ebbers and overlooked or ignored fraud of historic proportions.
Few could claim to be independent, Breeden said during a conference in Boston in 2003. One was apparently only inserted in the post because he was Ebbers' neighbor.
What were their priorities? Consider this, Breeden continued. In WorldCom's final year, directors met four times for an hour to 90 minutes each session, while the compensation committee met 17 times, approving, among other things, a $238 million "sack of cash" that Ebbers could distribute to employees at will as "retention bonuses."
Ebbers is awaiting trial on securities fraud charges and could face 25 years in jail if convicted.
A representative of MCI was not immediately available for comment.