Scott Sullivan, the former chief financial officer of WorldCom Inc., has agreed to forfeit his Boca Raton estate and his retirement fund to settle a class-action lawsuit for his role in the company’s $11 billion accounting fraud, according to press reports.
Rather than try to claim an exemption under the Florida Homestead Law, reported The New York Times, Sullivan agreed to forfeit the mansion, which is only 80 percent complete. The former finance chief testified that he never lived on the property, which includes a 19,000-square-foot house in a gated community, with 10 bedrooms, 12 baths, a library, a screening room, a boathouse, a six-car garage, and a gazebo. First listed at $22.5 million, it was marked down to $10.9 million late last year.
Sullivan also agreed to surrender his 401(k) account, which would reportedly be worth about $200,000 after taxes and penalties. He will be left with some household goods, “nearly worthless” business investments, and some other retirement funds unrelated to WorldCom, according to press reports. The Times noted that most of his money was tied up in WorldCom stock, which became worthless when the company went bankrupt.
Alan Hevesi — the trustee of the New York State Common Retirement Fund and the court-appointed lead plaintiff in the class action brought by WorldCom investors — offered to give 10 percent of the proceeds from Sullivan’s settlement to former WorldCom employees who are part of a separate civil suit, the Times reported. An undisclosed portion of the money held by Sullivan’s wife will be put in a trust for her and their 4-year-old daughter.
After Sullivan’s estate is sold, about $5 million is expected to be available to plaintiffs after payment of liens. WorldCom’s former controller David Myers and ex-accounting director Buford Yates — who, like Sullivan, have pleaded guilty to securities fraud— are reportedly unable to pay anything to the class.
U.S. District Judge Denise Cote set a hearing for Thursday to discuss the settlements’ preliminary approval.
Sullivan, scheduled to be sentenced in federal court on August 11, reportedly faces as much as 25 years in prison. Certainly his hope would be that the settlement, and his cooperation in helping to prosecute his former boss, chief executive officer Bernard Ebbers, would elicit leniency from U.S. District Judge Barbara Jones, who will determine Sullivan’s sentence.
Earlier this month Judge Jones sentenced Ebbers to 25 years in prison for his role as the “instigator of the fraud.” In addition, the former CEO also surrendered assets worth about $45 million before his sentencing.
Ebbers, 12 former WorldCom directors, the auditing firm Arthur Andersen, and investment banks that underwrote WorldCom securities have reached settlements with the investors that total more than $6 billion.