WorldCom agrees $54m payout
|6th Jan 2005
|Ten former directors at WorldCom have agreed to pay $54m (£28.85m), including $18m from their own pockets, to settle a class action lawsuit, reports say.
James Wareham, a lawyer representing one of the directors, told Reuters the 10 had agreed to pay those who lost billions when the firm collapsed.
The remaining $36m will be paid by the directors' insurers.
But, a spokesman for the prosecutor, New York State Comptroller Alan Hevesi, said no formal agreement had been made.
Corporate governance experts said that if the directors do dip into their own pockets for the settlement, it will set a new standard for the accountability of bosses, when the firms they oversee face problems.
"Directors very rarely pay," said Charles Elson, chairman of the Center for Corporate Governance at the University of Delaware.
He added that the settlement "sends a pretty strong shockwave through the director world".
A formal agreement on the payout is expected to be signed on Thursday in a US district court in Manhattan.
Earlier, the New York Times had reported that the personal payments were required as part of any deal at the start of negotiations.
The ten former outside directors are James Allen, Judith Areen, Carl Aycock, Max Bobbitt, Clifford Alexander, Stiles Kellett, Gordon Macklin, John Porter, Lawrence Tucker and the estate of John Sidgmore, who died last year.
It has not yet been determined how much each director will have to pay.
"None of the 10 former directors was a direct participant in the accounting machinations of the WorldCom fraud," said the Wall Street Journal (WSJ).
Two other outside former directors, Bert Roberts and Francesco Galesi, remain defendants in the lawsuit, said the newspaper.
According to the WSJ, which cites people familiar to the case, the settling directors are expected to deny wrongdoing and state they are settling the case to eliminate the uncertainties and expense of further litigations.
The second-largest US long-distance telecoms operator filed for bankruptcy in 2002 when an $11bn accounting scandal was unearthed.
The company emerged from Chapter 11 protection last year and changed its name to MCI Inc.
Former WorldCom chief executive Bernard Ebbers is to face trial this month on criminal charges that he oversaw the fraud.