Deutsche Bank Settles WorldCom Claims
Frankfurt, Germany-based Deutsche Bank said Thursday that it had agreed to pay $325 million to settle claims in a class-action suit brought after the collapse of WorldCom Inc.
The announcement came shortly after New York Comptroller Alan Hevesi announced that two other investment banking firms would pay $112.5 million to settle claims in the case. Hevesi is the court-appointed lead plaintiff in the case.
The two banking firms are WestLB of Germany, which will pay $75 million, and Caboto Holding of Italy, which will pay $37.5 million.
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.
Most of the banks and investment banks named in the case have settled, although J.P. Morgan Chase & Co. of New York is among the holdouts.
Hevesi plans to take the case to court March 17 if the remaining defendants don’t settle.
Hevesi said the settlements reached through Thursday totaled more than $4 billion. That makes it the largest recovery ever achieved in a securities class action. The previous high was a $3.2-billion settlement by services giant Cendant Corp. in 2000 over accounting fraud that cost shareholders billions, Hevesi said.
Deutsche Bank said its settlement, which is subject to court approval, was aimed at avoiding litigation.
“Although it denies that it engaged in any wrongdoing, Deutsche Bank is pleased to resolve this matter,” the bank said in a statement.
It said it would amend its 2004 net income report to reflect the payment.
The settlement was announced after the stock market ended its regular trading day. In Thursday trading, Deutsche Bank’s American-traded shares gained $1.12 to $92.05 on the New York Stock Exchange.
On Wednesday, Hevesi had reached agreement with several other banks, including Amsterdam-based ABN Amro Inc., Mitsubishi Securities International, BNP Paribas Securities Corp. and Mizuho International.
A number of other financial institutions settled earlier, including Lehman Bros. Inc. and Goldman Sachs Group Inc., both of New York.
Major banks that settled include Bank of America Corp. of Charlotte, N.C., which agreed to pay $460.5 million, and Citigroup Inc., the nation’s largest financial institution, which paid $2.58 billion.
Thursday’s announcement came as a jury in New York is deliberating in the fraud trial of WorldCom’s former chief executive, Bernard J. Ebbers, who is accused of orchestrating the accounting scheme that drove the company into bankruptcy. Those deliberations are scheduled to continue today.
WorldCom has since emerged from bankruptcy as MCI Inc.
Hevesi became lead plaintiff as the sole trustee of New York state’s pension fund.
