Thursday, September 22, 2005
WorldCom Securities Class Action Settlement Approved; Ebbers Prepares His Appeal
U.S. District Judge Denise Cote approved the settlement of the WorldCom securities fraud class action suit that involves a total of $6.1 billion. The largest payments came from Citigroup ($2.575 billion) and JP Morgan Chase ($2 billion), while former CEO Bernie Ebbers turned over virtually all his remaining assets to settle the case. WorldCom's former directors also made an approximately $25 million payment out of their personal assets, one of the few times directors have paid into a settlement for conduct that did not involve self-dealing or a conflict of interest. WorldCom bondholders will receive approximately $5 billion of the settlement fund, and shareholders who file claims will divide up approximately $1 billion, a pittance compared to the losses suffered by the owners of the company's stock who were wiped out in the bankruptcy (assuming the didn't sell before then). A Reuters story (here) discusses the settlement.
On a related front, a CNN.Com article (here) discusses one of the arguments Ebbers will advance on appeal, that the government's refusal to grant immunity to former WorldCom Chief Operating Officer Ronald Beaumont to allow him to testify for the defense at trial violated due process. Prosecutors named Beaumont as an unindicted coconspirator before trial, most likely to avoid admissibility problems by designating conversations he had with cooperating witness Scott Sullivan as coconspirator statements that fall outside the prohibition on hearsay. With that, Beaumont refused to testify by stating he would assert his Fifth Amendment privilege, and the only way around that roadblock is a grant of immunity, which the government must request. U.S. District Judge Jones denied the defense motion during trial for an order directing the government to authorize immunity on the ground that the testimony was not exculpatory of Ebbers, at least not directly. As a ground for a successful appeal, this is a very tough argument to win, even though Beaumont has not been indicted. (ph)