European Banks Join WorldCom Settlement

WestLB and Cabato will kick $112.5 million into the class-action fund.
By Matthew Goldstein ,

With a week to go before the start of jury selection in the massive

WorldCom

class-action litigation, the list of banks reaching a settlement with investors keeps growing.

The latest banks to settle with former shareholders and bondholders of the once mighty telecom are European banking concerns

WestLB

and

Caboto Holding

. Together, the two banks agreed to pay $112.5 million.

The latest settlements were announced Thursday by New York State Comptroller Alan Hevesi, the trustee for the New York State Common Retirement Fund, the lead investor in the class action. In the past week a number of WorldCom's former bankers, including

Bank of America

(BAC) - Get Report

,

Lehman Brothers

(LEH)

and

Goldman Sachs

(GS) - Get Report

, have reached pre-trial agreements with the investors.

With the two newest settlements, the settlement fund in the WorldCom litigation stands at $3.7 billion. But by day's end it the kitty could get even larger. Late Thursday,

Bloomberg

reported that

Deutsche Bank

(DB) - Get Report

had agreed to pay $325 million to the investors. A Hevesi spokesman could not be reached for comment on the reported deal with Deutsche Bank.

To date, the biggest settlement with any bank is the $2.65 billion payout from

Citigroup

(C) - Get Report

.

Of the more than a dozen banking defendants in the class action, the biggest holdout is

J.P. Morgan Chase

(JPM) - Get Report

. Legal analysts have suggested that any settlement with J.P. Morgan could approach the total paid by Citigroup, since both big banks were significant underwriters of WorldCom's bond and stock offerings.

The lawsuit, led by a New York state public pension fund, alleges that more than a dozen financial institutions misled investors by underwriting WorldCom stock and bonds. The shareholders claim the banks were either aware or should have been aware of the massive financial accounting fraud at the former telecom giant that filed for bankruptcy in June 2002.

WorldCom emerged from bankruptcy last April as MCI.

The wave of settlements with WorldCom's former bankers comes as jury deliberations in the criminal trial of former WorldCom CEO Bernard Ebbers continue in a Lower Manhattan federal court. Ebbers is charged with securities fraud, conspiracy and making false statements.

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