A group of state and local retirement funds and insurance companies recovered $651 million from WorldCom's (search) investment banks, auditors and company officers in a settlement announced Thursday.

As part of the settlement, Citigroup (C) and JPMorgan Chase & Co. (JPM), two of the defendants in several non-class action suits filed by the funds, agreed to jointly petition the Securities and Exchange Commission (search) for more stringent disclosures by banks underwriting future stock and bond offerings. The two Wall Street firms will be joined in the petition by the California Public Employees Retirement System (search) and five other retirement funds.

"I don't think ever before have Wall Street banks and investors jointly petitioned the SEC to require more disclosure in public offerings," said William Lerach, lead attorney for the plaintiffs.

Lerach represented 68 state, local and union retirement funds and insurance companies that had purchased WorldCom stocks and bonds between 1998 and 2001, during which time company officials had regularly altered WorldCom's financial statements to hide losses.

The plaintiffs did not join the class-action lawsuit filed by thousands of other institutions and investors in hopes of gaining a better deal. Last month, a federal judge approved a $6.1 billion settlement, to be paid to approximately 830,000 institutions and individual investors.

On top of the $651 million, Lerach expects to gain additional funds from the disgorgements paid by former WorldCom Chief Executive Bernie Ebbers (search) and former Chief Financial Officer Scott Sullivan (search), both of whom were sentenced to federal prison and heavily fined for their roles in the accounting scandal. Those recoveries are not expected to be large, Lerach said.

The $651 million recovery represents an 83 percent premium above what the funds and insurers would have received as part of the class action, according to figures provided by Lerach's firm, Lerach Coughlin Stoia Geller Rudman & Robbins LLP of San Diego. In addition, Lerach noted that while the class action lawsuit winds its way through the appeals process, delaying payments to investors by up to two years, the plaintiffs in this settlement will receive their money promptly.

The defendant firms also agreed to cover the defendant's legal costs and expenses, totaling another $94 million.

The SEC petition from JPMorgan Chase, Citigroup, CalPERS and retirement funds in Illinois and California will ask federal regulators to mandate more thorough disclosures from investment banks regarding the companies they represent in stock and bond underwriting. The petition will suggest disclosures of loans from the banks to companies and company officers, increased information on who will receive blocks of pre-IPO stock in a given company, and more information about the research coverage underwriters will provide on the companies they've underwritten.

In addition to Citigroup and JPMorgan Chase, the other investment banks were Goldman Sachs Group Inc., Lehman Brothers Holdings Inc., UBS Warburg, Bank of America Corp., Deutsche Bank, Credit Suisse Group subsidiary Credit Suisse First Boston USA, Tokyo-Mitsubishi, ABN AMRO, WestLandes, BNP Paribas, Caboto, and Mizuho.

Lerach would not say why only Citigroup and JPMorgan Chase agreed to join the SEC petition, saying only: "Our clients view the actions by Citi and Morgan in this regard as highly responsible, and will take it into account in deciding how they conduct their businesses in the future."

Accounting firm Arthur Andersen paid $8 million as part of the settlement, while the insurance policies covering directors and officers of WorldCom paid $4 million.