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WorldCom Settlement Collapse And Future Litigation

Taub Stephen | February 15, 2005

When former WorldCom and former Enron directors in January separately agreed to dip into their own pockets to partially settle shareholder lawsuits, some pundits proclaimed a new era of director vulnerability to future litigation.

But, several weeks later, the WorldCom deal apparently collapsed when a judge in the case struck down another key provision of the agreement.

As you recall, 10 former outside directors of WorldCom—now known as MCI—agreed to pay $54 million, including $18 million from their own pockets, to settle part of a class-action lawsuit brought by investors burned by the telecom giant's accounting scandal.

As the deal was structured, it would have increased the exposure of 16 investment banks that are also defendants in the case. These banks, of course, opposed the deal.

The Opinion

Earlier this month, U.S. District Judge...

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