Ten former WorldCom board members have agreed to pay $18 million of their own money in a $54 million settlement with investors who lost billions in the historic accounting fraud...
NEW YORK — Ten former WorldCom board members have agreed to pay $18 million of their own money in a $54 million settlement with investors who lost billions in the historic accounting fraud that nearly sank the telephone company, a source said.
But one of the insurance companies that would pay the balance of the $54 million has balked at some minor terms, holding up a final agreement, the source said yesterday on condition of anonymity.
The direct payments by the former board members — equaling about one-fifth of each one’s personal net worth — would be a highly unusual concession in a securities case.
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Yet the deal also marks the third such arrangement in resolving the most egregious corporate scandals of recent years: directors at Enron, Global Crossing and now WorldCom have agreed to personally chip in to restore a small fraction of the gigantic losses suffered by investors and employees.
That trend fits in with recent efforts by government regulators and prosecutors to force executives to bear more personal financial responsibility for negligence or wrongdoing.
“This is the best form of deterrence,” said Bruce Carton, executive director for securities-class-actions services at Institutional Shareholder Services, a top advisory firm for major investment funds. “If you can get the individuals who are involved to realize there is a prospect of losing personal wealth if they don’t do their jobs, then you will possibly influence behavior.”
Legal experts said yesterday the settlement might draw strong objections from several corners.
These include the big Wall Street firms still facing WorldCom investor suits over fraudulent representation of the company’s bonds, other plaintiffs who haven’t resolved their claims against the directors and the two WorldCom board members who declined to take part in the deal.