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Former WorldCom Chief Executive Bernard Ebbers agreed Thursday to forfeit most of his assets in a settlement entered into with class action plaintiffs and the Southern District of New York U.S. Attorney. The terms of the settlement call for a $5 million up-front payment and proceeds from the sale of his assets, estimated to range from $25 million to $40 million. Ebbers is scheduled to be sentenced before Southern District Judge Barbara Jones on July 13 after a jury found him guilty of nine counts of securities fraud and related crimes in March. The settlement will likely conclude the civil portion of the Ebbers’ lawsuits originating from the $11 billion accounting fraud that toppled WorldCom into bankruptcy in 2002 from which the company emerged in April 2004 as MCI. Class action plaintiffs, led by lawyers from Bernstein Litowitz Berger & Grossmann and Philadelphia-based Barrack, Rodos & Bacine, already have collected nearly $6.13 billion from financial institutions involved in underwriting WorldCom’s bonds, its former directors, and its former accounting firm, Arthur Andersen. The class will receive 75 percent of the proceeds from Ebbers’ assets scheduled to be sold — including a lumber company and timberlands, trucking company, a marina, a golf course and other ventures. The remainder will go to MCI, according to a statement released by New York Comptroller Alan Hevesi, who acted as the lead plaintiff in the class action case. ERISA pension claimants will receive $450,000, and some proceeds will be set aside to pay for Ebbers’ legal bills. The three-way deal involved Southern District U.S. Attorney David Kelley, whose office could have pursued restitution claims against Ebbers. “I thank U.S. Attorney Kelley for deciding that Ebbers’ assets should be returned to victimized investors through the class action litigation,” Hevesi said in a statement. Under the agreement, Kelley agreed to forego the restitution claims so that Ebbers’ assets could be disposed of through the mechanism set up by the class action litigation. “He basically agreed to step aside and waive his right to restitution because he was confident that the deal was going to maximize recovery for the class,” said Bernstein Litowitz’s John Coffey. As part of the arrangement, plaintiffs’ lawyers agreed not to take any fees from the Ebbers settlement and will help distribute notices to victims on behalf of the government, an expensive endeavor for the U.S. Attorney because there are at least 4 million victims in the case. According to recently enacted federal laws, prosecutors must contact known victims prior to the sentencing of a convicted criminal. The government’s required notice will accompany a mailing sent to class members by the plaintiffs’ group, Coffey said. The settlement comes months after a similar settlement with Adelphia’s John and Timothy Rigas, who, along with unconvicted members of their family, agreed to forfeit $715 million in assets, totaling nearly all of their holdings. The Ebbers settlement will not go into effect until Judge Denise Cote, who is overseeing the class actions, approves it. Three other former WorldCom executives, including former CFO Scott Sullivan, who was the government’s chief witness in Ebbers’ criminal trial, are involved in negotiations to settle civil claims, said Coffey.

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