Board Members Pay to Settle WorldCom Suit

In a settlement that has sent shock waves through corporate boardrooms, 11 former WorldCom Inc. board members have agreed to pay $20.2 million of their own money to settle a lawsuit tied to the company's $11 billion accounting fraud.

The Wall Street Journal reported that the settlement, once sidelined by a legal technicality, was reached on Friday.

It is highly unusual for board members to have to tap into their own resources to pay settlements such as this, and the WorldCom settlement, first announced in January, shocked many corporate boards. The board members liability insurance companies must also pay $35 million, the Journal reported.

The agreement is the latest in a string of settlements tied to a class action lawsuit led by New York State Comptroller Alan Hevesi, the Journal reported, adding the suit is schedule for trial later this month.

It seeks compensation from underwriters, former board members and the telecom company's former auditor Arthur Andersen LLP, claiming they failed in their duties to oversee the company and scrutinize its books, the Journal reported.

Reaching settlements of a combined $6 billion-a record for securities class action-are more than a dozen banks that underwrote WorldCom bonds in 2000 and 2001, the Journal reported.

The banks include J.P. Morgan Chase & Co. and Citigroup, Inc. J.P. Morgan, which had been the final holdout among the banks, agreed to settle last week, the day after former WorldCom CEO Bernard Ebbers was convicted on numerous federal charges related to the fraud in U.S. District Court.

WorldCom, now known as MCI, emerged from bankruptcy protection last year following the largest corporate accounting fraud case in U.S. history. The company is now entertaining acquisition offers from Verizon and Qwest Communications.

You may like these other stories...

Senate Takes Different Approach from House for Highway and Bridge FundEarlier this week, according to a New York Times article, the Senate agreed to fill the coffers of the fund that pays for highway and bridge repairs with...
There it stands, your client's 100-year-old, rickety, vermin-infested barn or former hotel or whatever the darn thing once was. And she's considering what to do with it. There are two words that can help her decide...
It's not a reality—yet—but accounting software is poised to eliminate accountants. We are at a tipping point for many similar professions: online education replacing professors, legal software replacing...

Upcoming CPE Webinars

Aug 5
This webcast will focus on accounting and disclosure policies for various types of consolidations and business combinations.
Aug 20
In this session we'll review best practices for how to generate interest in your firm’s services.
Aug 21
Meet budgets and client expectations using project management skills geared toward the unique challenges faced by CPAs. Kristen Rampe will share how knowing the keys to structuring and executing a successful project can make the difference between success and repeated failures.