Reuters reports that the funds were part of a broader class action case brought by New York State Comptroller Alan Hevesi on behalf of WorldCom investors, but pulled out of that case believing they could win a better deal. The class-action suit was settled for $6.1 billion (See Hevesi Settles with Last WorldCom Defendants ). The current settlement is about three times the amount the funds would have gotten as part of the broader case, fund officials said, according to Reuters.
The five pension funds involved in the case – the New York City Employees’ Retirement System, New York City Teachers’ Retirement System, New York City Police Pension Fund, New York City Fire Department Pension Fund, and the New York City Board of Education Retirement System – represent more than 600,000 active and retired public employees. The funds lost more than $100 million when WorldCom filed for bankruptcy after an $11 billion accounting fraud.
The settling defendants include Citigroup, J.P. Morgan Chase & Co., Bank of America Corp., Deutsche Bank AG, ABN AMRO, and Lehman Brothers Holdings Inc., which all underwrote WorldCom bond offerings, as well asJack Grubman, a former Wall Street analyst, ex-directors at WorldCom, and the company’s former auditors, Arthur Andersen LLP.
The pension funds’ settlement does not require court approval, and they expect to receive payment within the next few weeks.