A US district court judge last week approved a US$6.1 billion ($NZ8.8 billion) settlement to investors who lost money in an accounting fraud at telco giant WorldCom.
Judge Denise Cote of the US District Court for the Southern District of New York approved settlements that parties agreed to earlier this year, including US$2 billion to JP Morgan Securities and US$325 million to Deutsche Bank Securities, according to a spokesman for New York State Comptroller Alan Hevesi, trustee of the New York State Common Retirement Fund and the lead plaintiff in the civil case.
In November 2004, Cote approved a US$2.58 billion settlement with Citigroup.
The settlement includes payments from former WorldCom directors, as well as former chief executive Bernard Ebbers, who was convicted of fraud in March and sentenced to 25 years in prison. Under the settlement, Ebbers must give up a house and interests in several businesses, including a lumber company, a marina, a golf course and several thousand acres of timberland. Hevesi’s office in June estimated Ebbers’ assets included in the settlement were worth US$25–$40 million.
WorldCom, now MCI, filed for bankruptcy in July 2002, about a month after an internal audit uncovered US$3.8 billion in accounting errors. The accounting mis-statements eventually reached a total of US$11 billion. In March 2004, a month before the newly renamed MCI emerged from bankruptcy, the company issued a report reducing pre-tax income for 2000 and 2001 by US$74.4 billion.