Hevesi Settles with Last WorldCom Defendants

July 27, 2005 (PLANSPONSOR.com) - New York state Comptroller Alan Hevesi has hammered out a settlement with the three remaining former WorldCom executives in the civil suit over giant pension fund losses from the purchase of the filed company's bond issue.

In  a Web statement , Hevesi said the total recovery in the case is now more than $6.13 billion, with $18 million to $28 million in additional money expected to be recovered from the sale of assets covered by the recent pact with former WorldCom Chief Executive Bernard Ebbers.

The latest settlement covers former WorldCom executives Scott Sullivan, David Myers, and Buford Yates, according to Hevesi. Sullivan is WorldCom’s former chief financial officer; Myers is WorldCom’s former controller; and Yates is WorldCom’s former chief of accounting.

Hevesi was lead plaintiff in the case because the Common Retirement Fund – the state and local government retirement system Hevesi presides over – lost more than $300 million when WorldCom collapsed.

The Empire State official said in the Web statement that the settlement with Sullivan requires the estate mansion that Sullivan had been building in Boca Raton, Florida to be sold.  After brokers’ commissions and satisfaction of those liens, it is expected that approximately $5 million will be available for victimized investors.  Some 85.5% of the net sale proceeds will be distributed to investors in the class.  Some 9.5% of the net proceeds will be distributed to former WorldCom employees represented in the ERISA class action and 5% will be set aside to fund settlements that Sullivan may reach in other litigation arising from the WorldCom debacle, according to the comptroller’s statement.

In addition to surrendering the Boca Raton house, Sullivan will be required to liquidate what remains in his WorldCom employee 401(k) account and to pay those proceeds to Hevesi before Sullivan is sentenced in the related WorldCom criminal case on August 11.  After payment of taxes and penalties, the net proceeds to the victims from this account should be approximately $200,000.  Hevesi has agreed that 10% of the net proceeds from the 401(k) account will be distributed to the ERISA class; the remaining 90% will be distributed to the securities class represented by Hevesi.

A court hearing on the settlements is scheduled for September 9, 2005.

Each of the defendants involved in the settlement pleaded guilty to crimes from the WorldCom scandal and cooperated with the US Attorney’s Office in the prosecution of Ebbers.  The three men are scheduled to be sentenced by US District Judge Barbara Jones in early August.

Further information about this litigation and the settlements to date is  here