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Former Directors Agree To Settle Class Actions

Remaining defendants in the case include 16 investment banks that helped WorldCom issue stocks and bonds and Arthur Andersen, the now-defunct accounting firm that signed off on WorldCom's books. In May 2004, Citigroup Inc. agreed to pay $2.6 billion to settle its part of the case. Citigroup's investment banking arm was among the biggest underwriters of WorldCom securities.

Hevesi said on Friday that court-ordered settlement talks with all remaining defendants in the case were ongoing. But he also said he is prepared to litigate the case, which is scheduled to begin Feb. 28.

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MCI Inc.
WorldCom Q&A
WorldCom History
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Blame for Scandals Entering the Boardroom (The Washington Post, Jan 7, 2005)
10 Ex-WorldCom Directors Agree to Settlement (The Washington Post, Jan 6, 2005)
Judge Says MCI Broke Pay Rule (The Washington Post, Nov 25, 2004)
Story Archive and Company Background

Several former WorldCom officials have already pleaded guilty to fraud charges, including former chief financial officer Scott D. Sullivan. Former WorldCom chairman and chief executive Bernard J. Ebbers is scheduled to go on trial on charges of securities fraud this month.

Hevesi said on Friday that he insisted that the former WorldCom directors pay a significant portion themselves in order to send a message to other directors.

"I felt personally that this would be unfair and not a deterrent for future failure on the part of the directors if they were not held personally liable," he said.

Hevesi said he did not know how much each individual director would pay. One person familiar with the case, who asked not to be identified by name because all parties had agreed not to discuss the matter publicly, said some of the directors thought they could have won at trial but did not want to risk what could have been liability well in excess of the amount of the settlement.

The directors' position was complicated when the judge overseeing the case ruled last month that a prospectus issued before a massive WorldCom bond offering in 2001 included false and misleading statements.

Under federal securities law, that ruling meant the burden of proof in the case would have fallen on the directors to demonstrate that they conducted a thorough review and could not possibly have known the prospectus was misleading.

Staff researcher Meg Smith contributed to this report.

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