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A judge in the WorldCom civil fraud litigation Thursday indicated she would tell defendants to stop seeking information on government subpoenas and other communications relating to the ongoing criminal probe of the company’s former top executives. Southern District of New York Judge Denise L. Cote, who is presiding over the civil cases filed because of the collapse of the company’s stock amid revelations of a multibillion-dollar accounting fraud, said: “I don’t see any need for any party to discover the government’s investigation.” Assistant U.S. Attorney William Johnson, at a conference with all parties held Thursday, told Cote the defendants were seeking information on subpoenas and communications relating to the interviews or testimony of witnesses in the criminal probe. While the investigation is continuing, the government is primarily concerned about any impact that unlimited discovery or depositions might have on the upcoming trial of former chief financial officer Scott Sullivan, an alleged key player in a massive scheme to hide billions in telecommunications line leasing costs on WorldCom’s books. Some of the requests “would reveal the nature and scope” of the government’s investigation, Johnson said. The prosecutor also asked Cote to instruct the parties in the civil litigation to stop seeking similar information from the Securities and Exchange Commission and Wilmer, Cutler & Pickering, which conducted an internal investigation into the accounting fraud for the company. “We don’t intend to halt depositions,” Johnson said. “We just don’t want people asked about their communications” with investigators, he said. Judge Cote, who set a firm trial date of Jan. 10, 2005, for the investor lawsuits — to be followed two months later by trial on claims brought under the Employment Retirement Income Security Act (ERISA) — made it clear that the discovery schedule might be altered, but it would not be delayed. “I’m not going to let these requests create a problem which stops this litigation in its tracks,” she said. Defendants in the litigation include former chief executive officer Bernie Ebbers, WorldCom directors and 18 underwriters who include Salomon Smith Barney and its former top telecommunications analyst Jack Grubman. Prosecutors handling the Sullivan matter and the related investigation have not sought a broad stay of discovery before Cote. Instead, they have had an understanding with the parties in the civil litigation not to seek a stay as long as their criminal investigation is not compromised. But that understanding recently broke down, prompting the government to send a letter to Cote on Oct. 23 seeking a halt to some discovery until after the completion of the Sullivan prosecution, which is scheduled to begin in February before U.S. District Judge Barbara S. Jones. Johnson modified that request Thursday when Cote made it clear she would not stop discovery and had no intention of granting the defendants’ request to stop depositions until there was a verdict in the Sullivan trial. Stressing that she wanted to “accomplish as much as possible as quickly as possible,” the judge said, “much can be done before the Sullivan trial begins.” In a letter sent to the judge on Oct. 29, plaintiffs’ co-lead counsel John P. Coffey of Bernstein Litowitz Berger & Grossman argued against any stay of discovery or depositions, saying the court already had proven it could issue an order that “deftly balances the needs of the Government, the victimized investors and the civil defendants.” Coffey also noted in his letter that any disruption of discovery might affect ongoing court-ordered settlement negotiations proceeding under the auspices of Southern District Judge Robert Sweet and Southern District Magistrate Judge Michael Dollinger. SECOND LETTER Coffey wrote a second letter to the judge on Wednesday charging that he had obtained evidence that Milberg Weiss Bershad Hynes & Lerach and “at least one agent” were making “false and misleading statements” to absent class members who purchased WorldCom bonds to create the impression that “the only way those class members can recover any of their losses is if they retain Milberg and file an individual action.” Thursday, Cote ordered briefs on the issue without delay ahead of a Wednesday hearing on the matter. Also Thursday, Salomon attorney Martin London of Paul, Weiss, Rifkind, Wharton & Garrison said he planned to ask the 2nd U.S. Circuit Court of Appeals to take his appeal of Cote’s decision on Oct. 24 certifying the class in the litigation.

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