WorldCom Directors Tentatively Settle Employee Suit (Update1)

BC-worldcom-employees-suit-update1

WorldCom Directors Tentatively Settle Employee Suit (Update1)

c.2004 Bloomberg News

(Adds details of lawsuit beginning in seventh paragraph.) By David Glovin

June 14 (Bloomberg) -- Former WorldCom Inc. directors including ex-Chief Executive Bernard Ebbers agreed to a partial settlement of a lawsuit filed by employees who lost billions of dollars in retirement funds during the phone company's collapse.

U.S. District Judge Denise Cote in Manhattan disclosed the tentative accord today in an order that didn't reveal any terms.

The agreement follows last month's $2.65 billion settlement of a fraud suit by WorldCom investors against Citigroup Inc. The investors, who said Citigroup sold WorldCom securities at inflated prices, still have claims against other WorldCom underwriters.

Cote said the employees' lawyers "stated that they have reached an agreement in principle to settle their claims" against most defendants.

Lynn Sarko, a Seattle-based lawyer for the employees, confirmed that a tentative settlement had been reached. He said the plaintiffs would file a document later this week outlining the terms. Paul Curnin, a lawyer with Simpson Thacher & Bartlett in New York, who represents some of the directors, declined to comment.

The employees sued WorldCom, now known as MCI Inc., as well as Ebbers and others to recover billions of dollars that their 401(k) accounts lost by investing in company stock. The suit claimed WorldCom caused employees to keep WorldCom stock in their 401(k) accounts while knowing the company was overstating income.

Fiduciary Duty

Besides Ebbers, among those settling are former WorldCom Chairman Bert Roberts and former Vice Chairman John Sidgmore, as well as officials who administered the employee benefit plan. The settlement must be approved by Cote before it becomes final.

WorldCom, which had been originally sued, was removed from the case after the company filed for bankruptcy.

The case remains pending against Merrill Lynch Trust Co., the trustee of the retirement plan, for breach of fiduciary duty, and against former Chief Financial Officer Scott Sullivan, Cote said. She has scheduled the trial for March.

WorldCom in 2002 filed for the largest bankruptcy in U.S. history after an $11 billion accounting scandal left the company unable to pay its debts. The Ashburn, Virginia-based company came out of bankruptcy in April as MCI.

MCI shares today rose 5 cents to $14.65 at 2:58 p.m. New York time in over-the-counter trading.

The case is: In re WorldCom Inc. ERISA, 02-CV-4816, U.S. District Court, Southern District of New York. --Editors: Aarons, West. To contact the reporter on this story: David Glovin in U.S. District Court in New York at (1)(212) 732-9245 or dglovinbloomberg.net. To contact the editor responsible for this story: Patrick Oster at (1)(212) 893-4088 or posterbloomberg.net. -0- Jun/14/2004 19:01 GMT

AP-NY-06-14-04 1501EDT