Although the settlement must still be approved by the courts, the bulge-bracket bank has agreed to compensate bond shareholders of the failed company to the tune of $460.5 million. Shareholders had sued it, JP Morgan Chase & Co, and Deutsche Bank AG for their role in underwriting the company’s bonds. The suit claimed that proper due diligence was not conducted by the banks.
Last May, a federal appeals court ruled that a suit – brought pension funds such as Alan Hevesi’s New York State’s Common Fund and the California Public Employees’ Retirement System (CalPERS) – must be fought in federal and not state court. This forced them to join in a class action suit brought on behalf of all investors who purchased the bonds between April, 1999, and June, 2002 (See Pension Funds Ordered to Take WorldCom Case to Federal Court ). Hevesi is now leading the suit.
Bank of America did not admit any liability as part of the settlement, according to the Wall Street Journal. The shareholders will continue to seek funds from the two other banks named in the suit.