WorldCom Directors Settle
The directors involved with the settlement are James C. Allen, Judith Areen, Carl J. Aycock, Max E. Bobbitt, Clifford L. Alexander Jr., Stiles A. Kellett Jr., Gordon S. Macklin, John A. Porter, the Estate of John W. Sidgmore (Sidgmore died in 2003), and Lawrence C. Tucker (see Ex-WorldCom Chief Sidgmore Dies ).
Because each director has agreed to pay 20 percent of their personal net worth to settle the case, the agreement does not assign proportions of blame for the scandal. By agreeing to the penalty and to also cooperate with the plaintiffs on the continuing WorldCom case, the settlement resolves all claims against the directors in the suit.
“The fact that we have achieved a settlement in which these former outside directors have agreed to pay 20 percent of their cumulative personal net worth sends a strong message to the directors of every publicly traded company that they must be vigilant guardians for the shareholders they represent,” Hevesi says in a prepared statement. “We will hold them personally liable if they allow management of the companies on whose boards they sit to commit fraud.”
This is the second settlement reached in the WorldCom case, with the first coming in November 2004 when defendant Citigroup agreed to pay $2.575 billion.
The case still is not wholly resolved. Two directors -- Francesco Galesi, a real estate investor, and Bert C. Roberts Jr., former chairman and CEO of MCI Inc. (Nasdaq: MCIP), which merged with WorldCom in 1998 -- are still negotiating settlements.
Some say Roberts and Galesi didn't enter the group settlement because both men have a high net worth and would therefore be forced to pay much more than the directors who settled.
A trial date looms for the other defendants in the case, such as accounting firm Arthur Andersen LLP, and 16 banks that sold WorldCom bonds to the public, including J.P. Morgan Chase & Co., Deutsche Bank AG, and Bank of America.
“We are also vigorously continuing to pursue our claims against the others who bear responsibility for the debacle at WorldCom, including the remaining 17 underwriters, WorldCom’s auditor, Arthur Andersen, and the remaining directors of WorldCom, and look forward to the start of trial against those defendants on February 28, 2005,” Hevisi says. Former WorldCom CEO Bernard Ebbers, perhaps the biggest fish in the scandal, is scheduled to stand trial on criminal charges in Manhattan on January 18. Ebbers is accused of being the central figure who orchestrated the $11 billion fraud that drove the company to bankruptcy in 2002 (see Reports: It Began With Bernie and Report: Ebbers to Face Criminal Charges ).
WorldCom emerged from bankruptcy last March and now operates under the name MCI (see MCI Starts a New Chapter, MCI to Pay Record Settlement, MCI Settlement: What's Next?). A spokesperson from MCI, when contacted today, said that the company was not making any comment on the announced settlement.
— Chris Somerville, Senior Editor, Next-Generation Services