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NEW YORK � A federal judge approved more than $3.5 billion to WorldCom investors yesterday and granted the lead attorneys’ application for fees, awarding the two firms more than $194 million. The award raises the total compensation for the plaintiffs to $6.1 billion and boosts their firms’ attorneys’ fees to $335 million. Southern District Judge Denise Cote’s decision brings to a close a major chapter of the largest corporate fraud of the post-Enron era. Among the defendants to sign off on yesterday’s settlements were 17 underwriters, 12 WorldCom directors, the company’s former auditor Arthur Andersen and two of the companies most notorious executives, former CEO Bernard Ebbers and ex-CFO Scott Sullivan. Ebbers was convicted in March for his role in the fraud that resulted in WorldCom’s collapse. He was sentenced in July to 25 years in prison. Sullivan, who cooperated with prosecutors and testified against Ebbers, was sentenced last month to five years in prison. The settlements will compensate more than 800,000 individual and institutional investors who owned WorldCom stocks or bonds near the time of its 2002 collapse. Judge Cote’s approval brings the total compensation for WorldCom investors to more than $6.1 billion. In November, plaintiffs settled with Citigroup for its role in WorldCom’s decline. That agreement awarded the plaintiffs more than $2.5 billion and their attorneys’ $141 million. Judge Cote premised her decision on attorneys’ fees on the firms’ retainer agreements, various public policy considerations and the “impressive extent and superior quality” of the 277,862 hours of work logged by Philadelphia-based Barrack, Rodos & Bacine and Manhattan’s Bernstein Litowitz Berger & Grossmann. “At the conclusion of this litigation, more than ever, it remains true that ‘the quality of representation that lead counsel has provided to the class has been superb,’” Judge Cote wrote in In re Worldcom, Inc. Securities Litigation, 02 Civ. 3288, quoting an earlier decision in the same case. She noted that two methods may be used by a court to determine attorneys’ fees in a class action, percentage or the lodestar method, which calculates fees by multiplying hours worked against a reasonable hourly rate. Judge Cote opted for the percentage method, awarding just under 5.5 percent of the settlements with WorldCom’s directors, underwriters and Arthur Andersen. She cited a number of factors in support of her approval of the application. “[W]hen class counsel in a securities lawsuit have negotiated an arm’s-length agreement with a sophisticated lead plaintiff possessing a large stake in the litigation” � here, the New York State Common Retirement Fund � “and when that lead plaintiff endorses the application following close supervision of the litigation, the court should give the terms of that agreement great weight,” Judge Cote wrote. She noted that the retirement fund is the second largest in the nation and that it lost more than $300 million in WorldCom investments. Judge Cote looked to other class actions and found that the “fee request is well within the range of other awards courts have approved in mega-fund litigation.” She also emphasized public policy concerns, including rewarding the attorneys for their dedication and accomplishments, and encouraging other qualified attorneys to take on similar matters in the future. “The size of the recovery achieved for the class � which has been praised even by several objectors � could not have been achieved without the unwavering commitment of lead counsel to this litigation,” she wrote. “Several of the lead attorneys for the class essentially devoted years of their lives to this litigation, with the personal sacrifices that accompany such a commitment.” John Coffey, the lead trial attorney for Bernstein Litowitz, said he was “moved” by Judge Cote’s decision. “We’re extremely pleased that these historic settlements have been approved and are quite gratified by Judge Cote’s kind words about our efforts on behalf of the victimized WorldCom investors,” he added. Simpson Thacher & Bartlett represented the former WorldCom directors. Kelley Drye & Warren represented JP Morgan Chase, one of WorldCom’s largest underwriters. Mark Fass is a reporter with the New York Law Journal, a Recorder affiliate.

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