NEW YORK – Convicted former WorldCom (search) Chief Executive Bernard Ebbers (search), who faces the possibility of life in prison, agreed to forfeit virtually all of his cash, his home and other assets on Thursday in a settlement with investors in his failed telecommunications company.
The deal, announced by New York State Comptroller Alan Hevesi and U.S. prosecutors, is estimated to be worth roughly $30 million to $45 million depending on the value of Ebbers' assets. It comes two weeks before Ebbers, 63, is due to be sentenced in a New York federal court following his criminal convictions in March.
Prosecutors have asked for a life sentence for the one-time corporate chieftain, who was found guilty of orchestrating the accounting fraud that drove WorldCom into bankruptcy.
The financial agreement will provide compensation to WorldCom investors, who are part of a class-action suit led by Hevesi. Part of the settlement proceeds also will benefit MCI Inc. (MCIP), the successor company to WorldCom.
"Mr. Ebbers was the person most responsible for the biggest corporate fraud in history and it is appropriate that he surrender most of his personal wealth to the stockholders and bondholders he betrayed," Hevesi said in a statement.
Investors lost billions when WorldCom filed for bankruptcy protection in July 2002.
Under the class-action case overseen by Hevesi, a group of banks that advised WorldCom previously agreed to settle for more than $6 billion. Eleven former directors of the company also settled for $55 million — about half from their own pockets.
Except for money set aside to pay his legal bills and a modest living allowance for his wife, Ebbers will be required to relinquish all of his remaining cash, according to the agreement.
He also will have to give up his multimillion-dollar home in Clinton, Miss., as well as an income tax refund potentially worth millions and his interests in other ventures including: a lumber company, a golf course and a grain elevator company. Those assets will be sold in the coming months, with the proceeds split between the victims of the fraud and MCI.
The terms of the agreement are subject to approval by U.S. District Judge Denise Cote in Manhattan, who is overseeing the WorldCom securities litigation.
The settlement was widely expected prior to Ebbers' July 13 sentencing before another Manhattan federal judge, Barbara Jones.
"The conventional wisdom is that under such circumstances, where it appears the defendant has paid significant financial forfeitures and penalties, the court will take that into consideration," said Randy Mastro, a partner at the law firm Gibson, Dunn & Crutcher who specializes in white-collar crime matters.
Ebbers faces as much as 85 years in prison.
While prosecutors have asked for a stiff sentence, his lawyers have asked for leniency, saying the one-time milkman is a "decent and honorable man who rose from humble beginnings to the highest levels of corporate America."