WorldCom Execs Settle

N.Y. State Comptroller reaches settlements with ex-execs Scott Sullivan, David Myers, and Buford Yates; Sullivan to surrender mansion, 401k

August 2, 2005

3 Min Read

NEW YORK -- New York State Comptroller Alan G. Hevesi today announced that he has reached settlements with former WorldCom executives Scott Sullivan, David Myers, and Buford Yates, the three remaining defendants in the WorldCom Securities Class Action in which Hevesi serves as Lead Plaintiff. Sullivan is WorldCom’s former chief financial officer; Myers is WorldCom’s former controller; and Yates is WorldCom’s former chief of accounting. Each of these defendants pleaded guilty to crimes arising from the WorldCom scandal and cooperated with the U.S. Attorney’s Office in the prosecution of former WorldCom chief executive officer Bernard Ebbers. The three men are scheduled to be sentenced by U.S. District Judge Barbara S. Jones in early August.

The settlement with Sullivan requires the estate mansion that the Sullivans had been building in Boca Raton, Florida to be sold.

The sale of the house is subject to a number of liens. After brokers’ commission and satisfaction of those liens, it is expected that approximately $5 million will be available for victimized investors. 85.5% of the net sale proceeds will be distributed to investors in the Securities Class that Hevesi represents; 9.5% of the net proceeds will be distributed to former WorldCom employees represented in the ERISA class action; and 5% will be set aside to fund settlements that Sullivan may reach in other litigation arising from the WorldCom debacle.

In addition to surrendering the house in Boca Raton, Sullivan will be required to liquidate what remains in his WorldCom employee 401(k) account, and to pay those proceeds to Hevesi before Sullivan is sentenced on August 11. After payment of taxes and penalties, the net proceeds to the victims from this account should be approximately $200,000. Hevesi has agreed that 10% of the net proceeds from the 401(k) account will be distributed to the ERISA class; the remaining 90% will be distributed to the Securities Class represented by Hevesi.

With this proposed settlement, Sullivan has turned over substantially all of his assets other than personal effects, business interests that have been determined to be virtually worthless and some modest retirement assets (which could not be reached through civil litigation, and in any event are a fraction of the 401k account Sullivan has agreed to turn over).

The settlement with Sullivan was reached after extensive analysis by the Common Retirement Fund, its outside counsel, and representatives of the U.S. Attorney’s Office of the financial capabilities of the Sullivans.

As was the case with the recent Ebbers settlement, Lead Counsel at Bernstein Litowitz Berger & Grossmann LLP and Barrack, Rodos & Bacine have agreed to seek no fee from the Sullivan settlement.

The Common Retirement Fund, its outside counsel, and representatives of the U.S. Attorney’s Office also devoted considerable time and effort to evaluating the sworn financial statements and additional financial information provided by former WorldCom executives David Myers and Buford Yates and concluded that each is unable to make any payment in settlement with the Class. Accordingly, the settlement requires no payment from these two defendants.

With these three settlements, all of the defendants in the WorldCom Securities Class Action have settled with the Class. Taken with the anticipated proceeds from the Sullivan settlement, the total recovery obtained for the Class exceeds $6.136 billion, with $18 million to $28 million in additional money expected to be recovered from the sale of assets covered by the recent Ebbers’ settlement.

The settlements with Sullivan, Myers and Yates must be preliminarily approved by Judge Denise Cote, who has scheduled a hearing for this Thursday, July 28, at 11 a.m. It is expected that the final approval hearing for these settlements and the settlements reached earlier this year with WorldCom's former auditors and directors, and certain of WorldCom's former underwriters (including JPMorgan Chase and Bank of America) will take place on September 9, 2005.

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