WorldCom Court Approves $38 Million Recovery from Andersen

12/14/2012 - More than seven years after In re WorldCom, Inc. Securities Litigation was settled for over $6.15 billion in 2004 and 2005, an additional $38 million recovery reached between the Lead Plaintiff and WorldCom’s former auditor Arthur Andersen was granted final approval by the Court on December 14, 2012.

This additional settlement, negotiated separately from the previous $65 million amount that Arthur Andersen paid in cash to settle the case in April 2005, satisfies a contingent clause in the 2005 settlement agreement between the Lead Plaintiff and Andersen entitling the class to additional future payments if Andersen ever distributed money to its former partners on certain subordinated notes.

With this recovery, Andersen will now be paying a total of $103 million to resolve all claims against it in the case.

Filed in 2002, the case against WorldCom, the second-largest long distance telephone company in the nation at the time, arose following revelations that it had overstated billions of dollars in earnings, admitting to booking billions in line cost expenses as capital investments - an accounting gimmick that hid expenses, inflated cash flow and allowed the company to falsely report profits instead of losses. This improper and fraudulent accounting treatment constituted a blatant violation of GAAP (Generally Accepted Accounting Principles). The company subsequently filed for bankruptcy while investors reeled from massive financial losses related to the fraud. After three years of litigation and including nearly five weeks of trial against Andersen, BR&B reached settlements with all defendants, recovering over $6.15 billion on behalf of the investor class.  Of note was nearly $25 million from the pockets of WorldCom's outside directors, an unprecedented first for outside directors, and further monies being paid by the former senior Company executives.