Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Arthur Andersen continued to deny wrongdoing Monday as it settled with WorldCom investors who had accused the company’s former outside auditor of failing to protect them from WorldCom’s historic $11 billion accounting fraud. Details of the settlement were not immediately released. U.S. District Judge Denise Cote scheduled a preliminary approval hearing on the settlement for Tuesday and banned each side from discussing its details publicly. The deal interrupted a trial in its fifth week on the accusations contained in a class action lawsuit brought after WorldCom’s 2002 collapse, the largest bankruptcy in U.S. history. Before the trial, major investment banks agreed to pay more than $6 billion in settlements and a dozen former board members settled the case for $24.75 million, leaving Arthur Andersen as the sole defendant. Patrick Dorton, an Arthur Andersen spokesman, said in a statement that the company “elected to enter this settlement solely to avoid the risks and costs associated with continued litigation, and expressly denies any liability or wrongdoing.” Although he refused to divulge details of the settlement, he said it was “in keeping with Andersen’s strategic objective of satisfactorily resolving its remaining legal matters within reasonable cost parameters.” It’s not known exactly where Andersen would get the money for a settlement. But industry expert Mark Cheffers said Andersen likely has funds left over from liquidating its assets or in its reserves for insurance losses. “There’s probably any number of different sources for that payment,” said Cheffers, CEO of Audit Analytics, a Sutton, Mass.-based firm that provides market research for the audit industry. He said Andersen would closely guard the amount available for a settlement. Dorton said trial testimony had “demonstrated that Andersen’s auditors were victimized by a carefully designed and executed scheme by WorldCom’s former management to conceal material financial information from Andersen’s auditors as well as from the investing public.” The lawsuit was led by New York state Comptroller Alan Hevesi, acting as trustee of the state employees’ retirement system. John Chartier, a spokesman for Hevesi, said he had no immediate comment. The plaintiffs maintained that WorldCom’s annual financial statements for 1999, 2000 and 2001 contained false statements and that Arthur Andersen issued its audit opinions with an “intent to deceive, manipulate or defraud.” Arthur Andersen insisted through its lawyers that each of its audit opinions from 1999 through 2001 was generated in good faith and with no intent to deceive, manipulate or defraud. To find against Arthur Andersen, the jury would have had to conclude that Arthur Andersen’s conduct was “highly unreasonable” and that WorldCom’s fraud was known to the auditor or was so obvious that Arthur Andersen must have been aware of it. Last month, former WorldCom CEO Bernard Ebbers was convicted of fraud, conspiracy and false regulatory filings in the accounting scandal. He could spend the rest of his life in prison. Five other former WorldCom executives have pleaded guilty in the fraud and are awaiting sentencing. WorldCom, which collapsed when the accounting fraud to inflate earnings and hide expenses was revealed, has re-emerged as MCI Inc., based in Ashburn, Va. The class action lawsuit began as many investor suits, eventually consolidated by the judge. AP Business Writer Dave Carpenter in the Chicago bureau contributed to this story. Copyright 2005 Associated Press. All Rights Reserved. This material may not be published, rewritten, or redistributed.

Want to continue reading?
Become a Free ALM Digital Reader.

Benefits of a Digital Membership:

  • Free access to 3 articles* every 30 days
  • Access to the entire ALM network of websites
  • Unlimited access to the ALM suite of newsletters
  • Build custom alerts on any search topic of your choosing
  • Search by a wide range of topics

*May exclude premium content
Already have an account?


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.