A U.S. District Judge in Manhattan approved settlements to return more than $6.1 billion to investors who lost money in telecommunications company WorldCom Inc.'s historic accounting fraud.
The deals will divide payment among approximately 830,000 people and institutions that held stocks or bonds in the company when it collapsed in 2002, the largest bankruptcy in U.S. history. Erroneously declared revenues and expenses led to the discovery of an $11 billion accounting fraud at WorldCom, which now operates under the name MCI Inc., which led to billions in losses for investors.
Money for the payouts will come from a list of defendants, including more than a dozen investment banks, former auditor Arthur Andersen and former WorldCom directors. The largest contributions to the fund included $2.58 billion from Citigroup Inc. and $2 billion from JPMorgan Chase & Co. Investors argued that both companies, which underwrote or traded WorldCom securities, should have been aware of the fraud.Former CEO Bernard Ebbers was convicted of fraud in March and sentenced to 25 years in prison. He is free on bail as his appeal continues. Ebbers already agreed to pay $5 million and transfer the majority of his assets (valued between $18 million and $28 million) to the fund to settle civil charges.
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