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Thursday, March 17, 2005

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  A lawyer for the state retirement fund confirmed the settlement before U.S. District Court Judge Denise Cote in Manhattan.

Lawyers for Comptroller Alan Hevesi, the court-appointed lead plaintiff, told the judge the JPMorgan settlement brought the total settlements to $6 billion.

The lawyers also said they are close to a renewed settlement with 11 former WorldCom directors. A previous settlement had fallen apart.

"Let me give the court's congratulations to the settling parties," Cote said.

Cote then granted preliminary approval of settlements reached earlier with several major banks and investment banks, including Bank of America, Lehman Brothers and Credit Suisse First Boston.

The judge said the JPMorgan Chase settlement, plus settlements announced Wednesday with two boutique investment banks, left auditor Arthur Andersen and former WorldCom board member Bert Roberts as defendants in the class-action case — along with the 11 former WorldCom directors.

The announcement about the JPMorgan Chase settlement came a day before a trial was to start in the case.

It also came a day after WorldCom's former chief executive, Bernard Ebbers, was found guilty of fraud, conspiracy and false regulatory filings after a six-week federal trial in Manhattan. He could spend the rest of his life in prison.

WorldCom collapsed in a $11 billion accounting fraud in 2002. The case was brought by investors who purchased WorldCom securities in 2000 and 2001.

The investors have argued that the financial institutions that underwrote or traded WorldCom securities should have been aware of ongoing fraud at the company. WorldCom emerged from bankruptcy known as MCI Inc.

The settlement by JPMorgan Chase was second in size only to the $2.58 billion that Citigroup Inc., the nation's largest financial institution, agreed to pay last May to settle its share of the case.

JPMorgan Chase last year was offered a settlement on the same terms as Citigroup, which would have required it to pay $1.37 billion to settle. But JPMorgan Chase rejected the terms.

After announcing Wednesday's settlement, Hevesi said in a statement: "JPMorgan Chase is one of the most important financial institutions in the U.S. and in New York. I am particularly pleased that the management of the bank has decided to put this issue from the past behind it so it can focus on growing and creating jobs."

Hevesi also said that he was prepared to go to trial if the remaining defendants don't settle.

Cote set a Friday hearing for preliminary approval of the JPMorgan Chase settlement.

JPMorgan Chase shares fell 16 cents to $36.09 in afternoon trading on the New York Stock Exchange.

More than a dozen banks and investment banks reached settlements in the case, most in recent weeks.

Attorney Leonard Barrack, who was lead co-counsel for Hevesi in the case, told The Associated Press that it was "trail blazing litigation" in its effort to recover as much as possible as quickly as possible for investors who lost millions.

"It should be the pattern for other large fraud cases," said Barrack, who practices with Barrack, Rodos & Bacine, which is headquartered in Philadelphia.

© 2005 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.

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