NEW YORK – A federal judge Thursday gave preliminary approval to a settlement of a class-action lawsuit brought by WorldCom (search) investors under which its former finance chief Scott Sullivan (search) will forfeit the lavish, 10-bedroom mansion he is building in Florida.
Judge Denise Cote in Manhattan also granted approval to settlements with two other former WorldCom executives, David Myers and Buford Yates, in the lawsuit brought by investors in the fraud-toppled telecom.
New York state officials have said investors stand to gain about $5 million from the extravagant Mediterranean-style home nearing completion in Boca Raton.
Under the settlement, Sullivan must also sell what's left of his WorldCom 401(k) retirement account — once worth millions and now worth only $200,000 because so much of it was tied up in WorldCom stock.
Investors sued the executives, plus former WorldCom board members, an auditing firm and major investment banks that underwrote WorldCom securities, saying they should have been aware of the massive fraud.
New York state Comptroller Alan Hevesi (search), the lead plaintiff in the suit, has said more than $6 billion has been recovered for investors in settlements.
That still pales next to the size of the WorldCom fraud — $11 billion — and the untold billions lost by investors when the company went bankrupt in 2002.
Myers, the company's former controller, and Yates, its former accounting director, have so little money left the plaintiffs did not seek cash from them as part of the settlement.
Sullivan, Myers and Yates all face sentencings in the next two weeks after pleading guilty to criminal fraud charges.
They all helped the government build its case against former CEO Bernard Ebbers (search), who was sentenced to 25 years in prison in the fraud and will give up nearly all his personal assets in a settlement with investors.