Funds to announce WorldCom settlement

Martha Graybow

NEW YORK: A group of institutional investors is set to soon announce a legal settlement stemming from their losses in collapsed telecommunications company WorldCom Inc., a person familiar with the negotiations said on Wednesday.

The agreement would be separate from a $6.1 billion class- action settlement between investors and a group of investment banks, including Citigroup and JP Morgan Chase & Co., former WorldCom directors and other defendants. Some WorldCom investors opted out of that settlement, which recently won court approval, to pursue their own lawsuits.

No further details were immediately available about the new settlement's size or which institutional investors are involved.

In a related development, prominent plaintiffs law firm Lerach Coughlin Stoia Geller Rudman & Robbins LLP said in a news advisory that on Thursday it would announce a settlement in litigation "filed around a major corporate collapse."

The advisory did not specify what company was involved in the case, but Lerach Coughlin does represent some big investors, including the California Public Employees' Retirement System -- the largest U.S. pension fund -- that decided to forgo the wider WorldCom class-action case and pursue their own claims against banks that underwrote WorldCom bonds and other defendants.

A spokesman for the California fund, known as Calpers, could not immediately be reached.

The settlement to be announced Thursday will be worth "hundreds of millions" and will provide "an historic recovery" for investors, the Lerach Coughlin advisory said. An outside spokesman for the law firm, Michael Khoo, declined to provide further details.

WorldCom filed for bankruptcy in 2002 after an $11 billion accounting fraud, causing billions of dollars in losses to the company's stock and bond holders.

Former WorldCom Chief Executive Bernard Ebbers was found guilty of overseeing the wrongdoing and faces 25 years in federal prison, although he is appealing his case.

Other top executives, including former finance chief Scott Sullivan, also face prison time after pleading guilty to participating in the fraud.

WorldCom now operates as MCI Inc. It is in a deal to be bought by Verizon Communications for $8.6 billion.