Wed Jan 5, 2005 10:22 PM ET (original story...)
NEW YORK, Jan 5 (Reuters) - Ten former outside directors of WorldCom Inc. have agreed in principle to pay $54 million to settle their part of a class-action lawsuit brought by bondholders and shareholders following the phone company's collapse, the Wall Street Journal said in its online edition on Wednesday, citing unnamed people familiar with the matter.
The payout includes $36 million by insurers and $18 million by the directors themselves -- or 20 percent of their combined personal net worth, excluding primary residences, retirement accounts and some marital assets, the Journal said.
A formal agreement is expected to be signed and presented as early as Thursday to a Manhattan federal district judge for approval, according to the Journal.
The size of such an accord would be unprecedented for a case of this nature, and promises to expand the potential liability for corporate directors whose companies commit accounting fraud, the newspaper said.
"None of the 10 former directors was a direct participant in the accounting machinations of the WorldCom fraud," the Journal said.
The lead plaintiff is the New York State Common Retirement Fund, whose sole trustee is New York State Comptroller Alan Hevesi. Hevesi's office did not immediately return a call seeking comment. A spokesman for the comptroller declined to comment to the newspaper. Lawyers for the 10 former outside directors did not immediately return calls seeking comment.
The 10 settling former outside directors are James Allen, Judith Areen, Carl Aycock, Max Bobbitt, Clifford Alexander, Stiles Kellett, Gordon Macklin, John Porter, Lawrence Tucker and the estate of John Sidgmore, who died last year, the newspaper said. It has not been determined how much each will pay, it said.
Under the agreement-in-principle, the settling directors are expected to deny wrongdoing and state they are settling the case to eliminate the uncertainties and expense of further litigation, according to the Journal.
The other two outside directors, Bert Roberts and Francesco Galesi, remain defendants in the lawsuit, the newspaper said.
Citigroup Inc. (C.N: Quote
Other underwriters who were sued and have not settled include J.P. Morgan Chase & Co. (JPM.N: Quote , Profile , Research) Bank of America Corp. (BAC.N: Quote , Profile , Research) and Deutsche Bank AG (DBKGn.DE: Quote , Profile , Research).
WorldCom filed in 2002 for what remains the largest U.S. bankruptcy ever, amid what emerged as an $11 billion accounting scandal. It emerged from Chapter 11 protection last year and changed its name to MCI Inc. (MCIP.O: Quote , Profile , Research).
Former WorldCom chief executive Bernard Ebbers is slated to soon go on trial on fraud and other charges.
