In a move that is expected to expand the potential liability for corporate directors whose companies commit accounting fraud on their watch, 10 former board members of WorldCom Inc. have tentatively agreed to pay $54 million, including $18 million of their own money, to settle their part of a class-action lawsuit brought by investors who lost billions when the telecommunications giant collapsed amid one of the largest accounting scandals in history, according to published reports.
Under the agreement, the remaining $36 million would be paid by the directors' liability insurers, The Wall Street Journal and The New York Times reported.
Those involved in the settlement, who were directors of WorldCom from 1999 to 2002, neither admitted nor denied wrongdoing. According to the reports, the settlement includes all but two of WorldCom's former outside directors -- Bert Roberts and Francesco Galesi, who remain defendants in the lawsuit. The 10 former directors who agreed to the settlement are James C. Allen, Judith Areen, Carl J. Aycock, Max E. Bobbit, Clifford L. Alexander, Stiles A. Kellett Jr., Gordon S. Macklin, John A. Porter, Lawrence C. Tucker, and the estate of John W. Sidgmore, who died in December 2003.
The personal payments were a requirement of any deal from the start of the negotiations, lawyers involved in the settlement told the Times, which said that the amounts being paid will differ for each director. While the exact amounts weren't disclosed, the payments will reportedly account for 20 percent of the directors' aggregate net worth, not counting their primary residences and retirement accounts.
The agreement was expected to be signed and presented for approval to a federal district judge in Manhattan as early as Thursday, according to the Journal.
WorldCom, which overstated profits by billions, filed for the largest bankruptcy in history in 2002, and then emerged from Chapter 11 last year as MCI. The company's former chief executive, Bernard Ebbers, is scheduled to stand trial this month on criminal charges that he oversaw the $11 billion fraud at the company.
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