NEW YORK (AP) — A federal judge yesterday approved legal settlements that will return more than $6.1 billion to investors who lost money in the massive WorldCom accounting fraud.
The deals, approved by U.S. District Judge Denise Cote, will divide payments among approximately 830,000 people and institutions that held stocks or bonds in the telecommunications company around the time of its collapse in 2002.
The judge said the settlements were “of historic proportions.”
“Given the risks that would have been inherent in proceeding with the trial and any appeals, the settlement amount that will be allocated to the Securities Act claims is more than reasonable; it is remarkable,” the judge wrote.
Lawyers involved in the case said many investors will be getting back only a fraction of what they lost in the company’s collapse.
Money for the payouts will come from a long list of defendants, including investment banks, auditing firms and former WorldCom directors.
The largest chunks are a previously approved $2.58 billion payment by Citigroup Inc. and a $2 billion payment by JPMorgan Chase & Co. Investors claim the companies, which were among those that underwrote or traded WorldCom securities, should have been aware of the fraud.
Attorneys for the plaintiffs reached the settlement deals independently with the various defendants over the past year, but needed a judge’s permission to begin collecting payments.
WorldCom officials reputedly made billions of dollars in adjustments to the company’s financial statements to give investors a misleading picture of the company’s performance.
Former CEO Bernard Ebbers was convicted of fraud earlier this year and sentenced to 25 years in prison.
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