Ten of 12 former outside directors of WorldCom settled securities law violation allegations today, agreeing to pay a total of $18 million from their personal assets, according to Alan G. Hevesi, New York state comptroller and sole trustee of the $117 billion New York State Common Retirement Fund, Albany. Mr. Hevesi is the court-appointed lead plaintiff in the WorldCom lawsuit, filed in U.S. District Court in New York.
In addition to the $18 million payment, insurance companies for the 10 directors agreed to pay a total of $36 million, and the directors agreed to cooperate in the continuing lawsuit. The remaining two outside directors, WorldCom auditor Arthur Andersen and 16 banks that underwrote two bond offerings for WorldCom, remain defendants in the lawsuit.
The $18 million represents 20% of the 10 directors' cumulative personal net worth, Mr. Hevesi told a news conference.
"The settlement is quite important and quite dramatic," he told reporters, adding that it represents the first time a company's outside directors have been held personally responsible for company actions. The directors neither admitted nor denied the charges.