BofA Settles Suit by WorldCom Investors
Following the lead of Citigroup Inc., Bank of America Corp. on Thursday became the second large U.S. bank to settle claims stemming from a class-action lawsuit by former shareholders of WorldCom Inc.
The decision by Bank of America to pay $460.5 million to settle the case came as closing arguments were being heard in the criminal trial of former WorldCom Chief Executive Bernard J. Ebbers, who is accused of fraud, conspiracy and other crimes in what prosecutors allege was an $11-billion accounting fraud at the telecommunications company.
Citigroup, the nation’s largest financial institution, last year paid $2.58 billion to settle its share of the class-action suit.
The suit was brought against more than a dozen Wall Street firms by individuals and institutions who invested in stocks and bonds before WorldCom filed for bankruptcy protection in 2002 amid an accounting scandal.
The investors claimed that the defendants should have been aware of ongoing fraud at WorldCom, which has since emerged from Chapter 11 as MCI Inc.
Charlotte, N.C.-based Bank of America, the nation’s third-largest bank, denied that it violated any laws, saying it decided to settle the claims “to eliminate the uncertainties, expense and distraction” of further litigation.
“Bank of America believes it is in the best interests of the company to resolve these claims and put this litigation behind it and focus efforts on creating greater value for the shareholder,” the bank said in a statement.
Bank spokeswoman Shirley Norton said the company would have no additional comment on the settlement.
Shares of the bank fell 24 cents to $46.33 on the New York Stock Exchange.
New York State Comptroller Alan G. Hevesi, who has taken the lead in the class-action case against the banks and Wall Street firms, said, “This is an important settlement as the case heads to trial on March 17.”
He said the amount that Bank of America’s subsidiaries -- Banc of America Securities and Fleet Securities Inc. -- would pay “is based on the same formula under which the Citigroup defendants settled the bond portions of the claims against them in May 2004.”
Bank of America acquired Fleet Securities Inc. as part of its acquisition of FleetBoston in April 2004.
Hevesi added: “We are also vigorously continuing to pursue our claims against the others who bear responsibility for the debacle at WorldCom, including the remaining 14 underwriters.”
The lawsuit names a number of defendants, including former WorldCom executives and directors; the company’s accountant, Arthur Andersen; and banks and brokerages that were underwriters of WorldCom bonds.
