A district court judge here gave the okay to a settlement in which Arthur Andersen agreed to pay $65 million to resolve a class-action lawsuit brought by WorldCom investors who alleged that the audit firm failed to protect them by not uncovering the $11 billion fraud at the telecommunications company.
Andersen also agreed to pay investors 20 percent of any remaining capital that it intends to distribute to its partners, and to also pay the difference between the $65 million and any larger settlement in any other lawsuit it may settle in the future, Sean Coffey, an attorney for lead plaintiff the New York State Common Retirement Fund, confirmed Tuesday.
The audit firm was the last defendant in the investor lawsuit stemming from WorldCom's 2002 collapse. The settlement put an end to the largest securities fraud class action in U.S. history.
"The evidence clearly showed that Andersen auditors complied with all professional obligations in their work," firm spokesman Patrick Dorton said. "There is no question that Andersen was victimized by a carefully designed and executed scheme by WorldCom's former management to conceal material financial information."
"Andersen entered into the agreement solely to avoid the risks associated with this litigation," Dorton continued.
Investors alleged that Andersen, WorldCom's former auditor, overlooked the $11 billion fraud at the telecommunications company. After filing for bankruptcy in July 2002, WorldCom emerged last year as MCI Inc.
The former Big Five firm, which shuttered its audit practice in 2002 following its conviction on an obstruction of justice charge in the Enron Corp. case, denied wrongdoing in the WorldCom case.
Prior to the trial, WorldCom's former underwriters agreed to settlements totaling more than $6 billion, while 12 former WorldCom directors in March agreed to pay a total of $60.75 million, including $24.75 million from their own pockets, to settle claims against them.
Meanwhile, the U.S. Supreme Court is set to hear arguments today on Andersen's appeal of its conviction in the Enron Corp. case. The defunct firm is arguing that its conviction must be reversed because of improper jury instructions. Enron, which imploded in a record bankruptcy in December 2001, was Andersen's largest client.
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