A group of institutional investors is expected to announce a $651 million legal settlement with Wall Street firms that underwrote securities for collapsed telecommunications company WorldCom Inc., the Wall Street Journal reported on Thursday, citing people familiar with the situation.
Nearly all of the settlement will be paid by 17 securities firms and banks that underwrote WorldCom offerings. Citigroup Inc. and J.P. Morgan Chase & Co. will pay the largest portions, the Journal reported.
The settlement is expected to be announced on Thursday by the group’s lead law firm, Lerach Coughlin Stoia Geller Rudman & Robbins of San Diego, the paper said.
The settlement, according to the Journal, covers 32 individual suits and involves about 60 institutions, including the California Public Employees’ Retirement System, the California State Teachers’ Retirement System, American International Group, and public pension funds from Illinois, West Virginia and Alaska.
Reuters on Wednesday had reported a WorldCom settlement was set to be announced soon.
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, former WorldCom directors and other defendants. Some WorldCom investors had opted out of that settlement, which recently won court approval, to pursue their own lawsuits.
So far this year, Wall Street firms have agreed to pay more than $12 billion to settle claims by investors who lost money in the wake of accounting scandals at WorldCom and Enron Corp., the paper said.
Lerach Coughlin represents some big investors that decided to forgo a separate $6.1 billion WorldCom class-action, led by the New York State Common Retirement Fund, 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 be reached for comment. A spokesman for Lerach Coughlin, Michael Khoo, declined to elaborate on a media advisory the firm issued Wednesday that a major legal settlement would unveiled Thursday.
The firm is expected to receive $85 million in fees from the latest settlement, the paper said.
WorldCom filed for bankruptcy in 2002 after an $11 billion accounting fraud, generating 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, which now operates as MCI Inc., agreed earlier this year to be bought by Verizon Communications for $8.6 billion.