Night Owl
June 30th, 2005, 10:54 PM
FOR RELEASE: June 30, 2005
WorldCom Former CEO Ebbers Will Hand Over Most of His Personal Assets to WorldCom Shareholders and Bondholders
New York State Comptroller Alan G. Hevesi, the lead plaintiff in the WorldCom Securities Class Action Litigation, and U.S. Attorney for the Southern District of New York David N. Kelley, who has been conducting the criminal prosecution of former WorldCom CEO Bernard Ebbers, have reached a settlement with Ebbers of claims against him flowing from the WorldCom Securities Litigation, Hevesi announced today. The settlement provides that most of the personal assets of Ebbers that could have been subject to a fine or restitution in the criminal case will instead flow directly to victimized WorldCom shareholders and bondholders.
“Mr. Ebbers was the person most responsible for the biggest corporate fraud in history and it is appropriate that he surrender most of his personal wealth to the stockholders and bondholders he betrayed,” Hevesi said. “I thank U.S. Attorney Kelley for deciding that Ebbers’ assets should be returned to victimized investors through the class action litigation.”
The terms of the settlement require Ebbers to transfer substantially all of his assets either directly to the Class in the WorldCom Securities Litigation or to a liquidation trust that will be established to sell off his assets for the benefit of the Class and MCI, Inc., the successor to WorldCom.
Other than certain amounts set aside to pay legal bills and a modest living allowance for his wife, Ebbers will be required to transfer all of his remaining cash to the Class. This will result in an initial recovery for the Class of approximately $5 million in cash, $3 million of which must be paid within three days of preliminary approval of the settlement by Judge Denise Cote. A hearing on preliminary approval has not been scheduled, but is expected to be held before Ebbers is sentenced in the criminal case by Judge Barbara Jones on July 13. The terms also require Ebbers to make the remaining $450,000 payment to the class of former WorldCom employees who sued Ebbers in the related WorldCom ERISA class action. That payment must be made before the July 13 sentencing.
In addition to the cash payments to the Securities Class and the ERISA Class, Mr. Ebbers will also be required to transfer to the Class/MCI trust substantially all of his remaining non-cash assets, including his multi-million dollar home in Clinton, MS (which he and his family must vacate when sold or in any event by October 31, 2005); a prospective multi-million dollar income tax refund; and his interests in a number of businesses including, a lumber company, several thousands acres of timberland, a major trucking company, a marina, a golf course, a grain elevator company, a rice farm, a hotel, and other real estate ventures. These assets will be sold in the coming months, with the proceeds being split between the Class and MCI. The Class will receive 75% of the proceeds of these sales, and MCI will receive 25% of the proceeds, except in the case of the Joshua Timberlands property, as to which MCI currently has a lien and for which the proceeds of any sale will be split two-thirds for the Class and one-third for MCI. A small percentage of the net proceeds of the Trust will be set aside in an escrow account to help fund settlements involving other litigation arising from Mr. Ebbers' tenure as CEO of WorldCom.
Although it is difficult to predict the precise amounts to be realized in sales of these non-cash assets, it is estimated that the total value of these assets could be in the range of $25 million to $40 million. Thus the class could receive $5 million in cash and between $18 million and $28 million from the sale of assets for a total of as much $33 million. The lawyers in the WorldCom Securities Litigation have agreed not to receive any fees from this settlement, although they were involved in the negotiations.
This settlement will resolve the securities class claims against Ebbers, which had been stayed by Judge Cote while Ebbers’ criminal case was proceeding. The U.S. Attorney's Office, which presided over the extensive negotiations among Ebbers, the Class, and MCI, has agreed to seek no restitution at the time of Ebbers’ sentencing on July 13. New York Attorney General Eliot Spitzer has also agreed to resolve his case against Ebbers in return for the payments and asset transfers he is making for the benefit of the Class.
The WorldCom stockholders and bondholders have already reached settlements worth a total of $6,128,056,840.
“I would like to thank the U.S. Attorney and his staff, in particular Assistant U.S. Attorney David Anders, our outside lawyers who continue to do an excellent job representing the class, and my staff for negotiating this excellent settlement,” Hevesi said. “I also compliment the management and outside counsel of MCI, Inc. for their remarkable cooperation in fashioning this settlement and indeed for their cooperation throughout the WorldCom securities class action.”
The NYSCRF and investor class are represented by the law firms of Bernstein Litowitz Berger & Grossmann LLP and Barrack, Rodos & Bacine, who were appointed as Co-Lead Counsel by Judge Cote in August 2002.
WorldCom Former CEO Ebbers Will Hand Over Most of His Personal Assets to WorldCom Shareholders and Bondholders
New York State Comptroller Alan G. Hevesi, the lead plaintiff in the WorldCom Securities Class Action Litigation, and U.S. Attorney for the Southern District of New York David N. Kelley, who has been conducting the criminal prosecution of former WorldCom CEO Bernard Ebbers, have reached a settlement with Ebbers of claims against him flowing from the WorldCom Securities Litigation, Hevesi announced today. The settlement provides that most of the personal assets of Ebbers that could have been subject to a fine or restitution in the criminal case will instead flow directly to victimized WorldCom shareholders and bondholders.
“Mr. Ebbers was the person most responsible for the biggest corporate fraud in history and it is appropriate that he surrender most of his personal wealth to the stockholders and bondholders he betrayed,” Hevesi said. “I thank U.S. Attorney Kelley for deciding that Ebbers’ assets should be returned to victimized investors through the class action litigation.”
The terms of the settlement require Ebbers to transfer substantially all of his assets either directly to the Class in the WorldCom Securities Litigation or to a liquidation trust that will be established to sell off his assets for the benefit of the Class and MCI, Inc., the successor to WorldCom.
Other than certain amounts set aside to pay legal bills and a modest living allowance for his wife, Ebbers will be required to transfer all of his remaining cash to the Class. This will result in an initial recovery for the Class of approximately $5 million in cash, $3 million of which must be paid within three days of preliminary approval of the settlement by Judge Denise Cote. A hearing on preliminary approval has not been scheduled, but is expected to be held before Ebbers is sentenced in the criminal case by Judge Barbara Jones on July 13. The terms also require Ebbers to make the remaining $450,000 payment to the class of former WorldCom employees who sued Ebbers in the related WorldCom ERISA class action. That payment must be made before the July 13 sentencing.
In addition to the cash payments to the Securities Class and the ERISA Class, Mr. Ebbers will also be required to transfer to the Class/MCI trust substantially all of his remaining non-cash assets, including his multi-million dollar home in Clinton, MS (which he and his family must vacate when sold or in any event by October 31, 2005); a prospective multi-million dollar income tax refund; and his interests in a number of businesses including, a lumber company, several thousands acres of timberland, a major trucking company, a marina, a golf course, a grain elevator company, a rice farm, a hotel, and other real estate ventures. These assets will be sold in the coming months, with the proceeds being split between the Class and MCI. The Class will receive 75% of the proceeds of these sales, and MCI will receive 25% of the proceeds, except in the case of the Joshua Timberlands property, as to which MCI currently has a lien and for which the proceeds of any sale will be split two-thirds for the Class and one-third for MCI. A small percentage of the net proceeds of the Trust will be set aside in an escrow account to help fund settlements involving other litigation arising from Mr. Ebbers' tenure as CEO of WorldCom.
Although it is difficult to predict the precise amounts to be realized in sales of these non-cash assets, it is estimated that the total value of these assets could be in the range of $25 million to $40 million. Thus the class could receive $5 million in cash and between $18 million and $28 million from the sale of assets for a total of as much $33 million. The lawyers in the WorldCom Securities Litigation have agreed not to receive any fees from this settlement, although they were involved in the negotiations.
This settlement will resolve the securities class claims against Ebbers, which had been stayed by Judge Cote while Ebbers’ criminal case was proceeding. The U.S. Attorney's Office, which presided over the extensive negotiations among Ebbers, the Class, and MCI, has agreed to seek no restitution at the time of Ebbers’ sentencing on July 13. New York Attorney General Eliot Spitzer has also agreed to resolve his case against Ebbers in return for the payments and asset transfers he is making for the benefit of the Class.
The WorldCom stockholders and bondholders have already reached settlements worth a total of $6,128,056,840.
“I would like to thank the U.S. Attorney and his staff, in particular Assistant U.S. Attorney David Anders, our outside lawyers who continue to do an excellent job representing the class, and my staff for negotiating this excellent settlement,” Hevesi said. “I also compliment the management and outside counsel of MCI, Inc. for their remarkable cooperation in fashioning this settlement and indeed for their cooperation throughout the WorldCom securities class action.”
The NYSCRF and investor class are represented by the law firms of Bernstein Litowitz Berger & Grossmann LLP and Barrack, Rodos & Bacine, who were appointed as Co-Lead Counsel by Judge Cote in August 2002.