Arthur Andersen to Settle WorldCom Case

Arthur Andersen, the remaining defendant in the 3-year-old investor lawsuit stemming from WorldCom Inc.’s 2002 collapse, agreed to settle its liability in the case, halting a four-week fraud trial.

U.S. District Judge Denise Cote in New York announced the accord in an order Monday but did not give details of the proposed deal with the former accounting firm, which had been WorldCom’s auditor. Cote was expected to hold an approval hearing today.

A settlement would end the largest securities fraud class action in U.S. history. Lawsuits against former WorldCom officers, 12 former directors, 17 investment banks and Andersen were first filed in 2002.

Andersen spokesman Patrick Dorton in Chicago said in a statement that the firm “elected to enter into this settlement solely to avoid the risks and costs associated with continued litigation and expressly denies any liability or wrongdoing.” He would not comment further.

The lawsuit was led by New York Comptroller Alan Hevesi, who is trustee of the state employees’ retirement system. A spokesman for Hevesi said the judge had ordered the parties not to comment on the settlement before today’s hearing.

Other defendants in the class action have settled for a total of $6 billion. WorldCom filed for bankruptcy protection in July 2002 after revealing an $11-billion accounting fraud.

A jury of five women and four men over the last four weeks has heard evidence that Andersen overlooked accounting manipulations at the onetime telecom giant to protect its fee income.

Andersen argued that it was duped by WorldCom management and couldn’t have discovered the accounting fraud because it was so well hidden.

Andersen was convicted in 2002 of criminal obstruction of a government probe in the Enron Corp. fraud case. Andersen once had 85,000 employees but now is down to fewer than 200 and no longer does auditing work.

WorldCom emerged from bankruptcy last year as MCI Inc.