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JP Morgan Settles With WorldCom for $2B

Associated Press
Published | Updated

NEW YORK – JPMorgan Chase & Co. (JPM) agreed to a $2 billion settlement on Wednesday, becoming the last major bank to settle claims in a class action suit brought after the collapse of WorldCom Inc (search).

A lawyer for the state retirement fund confirmed the settlement before Judge Denise Cote of Manhattan federal court.

Lawyers for Comptroller Alan Hevesi, the court-appointed lead plaintiff, told the judge the JPMorgan settlement brought the total settlements to $6 billion.

The lawyers also said they are close to a renewed settlement with 11 former WorldCom directors. A previous settlement had fallen apart.

"Let me give the court's congratulations to the settling parties," Cote said.

Cote then granted preliminary approval for settlements reached earlier with several major investments, including Bank of America, Lehman Brothers and Credit Suisse First Boston.

The judge said the JPMorgan settlement, plus settlements announced Wednesday with two much smaller banks, left only two defendants in the case — auditor Arthur Andersen and former WorldCom board member Bert Roberts.

The announcement came a day before a trial was to start in the case.

It also came a day after WorldCom's former chief executive, Bernard Ebbers (search), was found guilty Tuesday of fraud, conspiracy and false regulatory filings after a six-week federal trial in Manhattan. He could spend the rest of his life in prison.

WorldCom collapsed in a $11 billion accounting fraud in 2002. The case was brought by investors who purchased WorldCom securities in 2000 and 2001.

The investors have argued that the financial institutions that underwrote or traded WorldCom securities should have been aware of ongoing fraud at the company.

The settlement by JPMorgan Chase, the nation's second largest financial institution, was second in size only to the $2.58 billion that Citigroup Inc., the nation's largest financial institution, agreed to pay late last year to settle its share of the case.

More than a dozen banks and investment banks reached settlements in the case, most in recent weeks.