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Reportedly, the former directors will personally shell out $20.2 million, and the carriers for their directors' and officers' insurance will pay an additional $35 million.
Stephen Taub, CFO.com | US
March 21, 2005
To settle a lawsuit related to the sale of WorldCom Inc. bonds, eleven onetime directors of the company now known as MCI Inc. have once again agreed to pay out of their own pockets.
The new deal — which is subject to a judge's approval this week — was announced late last week by New York State comptroller Alan Hevesi, sole trustee of the New York State Common Retirement Fund and court-appointed lead plaintiff in the WorldCom securities litigation. The former directors will personally shell out $20.2 million, and the carriers for their directors' and officers' insurance will pay an additional $35 million, according to The New York Times.
Ten directors had agreed to a similar deal in January but withdrew after a judge struck down one critical provision of the agreement.
It's very unusual for directors to settle lawsuits with their own money, yet the WorldCom deal is at least the second such instance this year. In January, shortly after the original settlement with WorldCom directors, 18 former directors of Enron Corp. announced that they would pay $168 million to settle a shareholder. Under that deal, 10 of the directors agreed to kick in $13 million of their own money.
The settlement with the former WorldCom directors came less than a week before a trial was scheduled to begin. Last week the final investment-bank holdout, J.P. Morgan Securities, agreed to pay $2 billion to settle claims related to the bond offerings. Including the Morgan deal, the total amount recovered by WorldCom bondholders has topped $6 billion — nearly twice the $3.18 billion recovered in the Cendant settlement.
The remaining defendants in the WorldCom litigation are former auditor Arthur Andersen and former chairman Bert C. Roberts Jr., the only director not to agree to last week's deal, according to The Wall Street Journal.
According to the Journal, the directors who agreed to settle are: James C. Allen, a telecommunications-industry executive; Francesco Galesi, a real-estate magnate and investor; Judith Areen, former dean of Georgetown Law School; Carl J. Aycock, a former motel-industry executive; Max E. Bobbitt, a telecom consultant and executive; Clifford L. Alexander, president of consulting firm Alexander & Associates Inc.; Stiles A. Kellett Jr., chairman of Kellett Investment Corp.; Gordon S. Macklin, former president of the National Association of Securities Dealers; John A. Porter, a former WorldCom chairman and vice chairman; Lawrence C. Tucker, a partner at Brown Brothers Harriman; and the estate of the late John W. Sidgmore, who briefly served as WorldCom chief executive officer in 2002.