Missteps by J.P. Morgan Chase & Co. and by its lead lawyer caused the firm to shell out an additional $630 million for its part in the WorldCom settlement, according to The Wall Street Journal, citing people involved in the case.
J.P. Morgan — co-lead underwriter with Citigroup Inc. and the last of 17 financial firms to settle — agreed last week to pay $2 billion for claims related to two bond offerings for scandal-plagued WorldCom Inc. Those offerings took place about a year before the telecom giant filed for bankruptcy protection.
Altogether, the financial companies have agreed to settlements totaling more than $6 billion.
The Journal observed that last year, J.P. Morgan could have settled for $1.37 billion. Reportedly, however, at that time Jay B. Kasner of Skadden Arps Slate Meagher & Flom — the lead lawyer for the financial firms — lowballed the bank’s offer, apparently arguing that WorldCom’s auditors were at fault for the telecom company’s collapse. The newspaper added that Kasner also criticized Citigroup for agreeing to settle for $2.6 billion early on.
Collectively, the financial institutions would have paid $677 million less if all of them had agreed to the early settlement offer, the paper added.
Today, Kasner doesn’t represent any of the underwriters. The Journal noted, however, that J.P. Morgan doesn’t blame Kasner for the large settlement; rather, the bank cited several unfavorable court rulings.