Tuesday, July 12, 2005 | 9:23 a.m.
A judge gave preliminary approval to a settlement of a lawsuit that will leave Bernard Ebbers, the ex-WorldCom Inc. chief executive who was once worth $1 billion, with $50,000 and a "modest" home in Jackson, Miss.
Final approval may occur Sept. 9 after the judge has heard any objections. Investors have previously won more than $6.1 billion from WorldCom's accountants, directors and banks, including Citigroup Inc. and JPMorgan Chase & Co. The investors lost $11 billion.
Ebbers will be sentenced July 13 in a related criminal fraud case. He'll pay almost all of his assets to resolve the civil case, including $5.5 million in cash, a multimillion-dollar home and stakes worth up to $40 million in businesses including a golf course, hotel, marina and 300,000 acres of timberland.
"We're taking their farm vehicles," said investors' lawyer John "Sean" Coffey after a hearing Monday in New York federal court. "We think it will help us sell the land."
Under the pact, Ebbers and his wife, Kristi, will be left with $50,000 in cash, a "modest" home in Jackson, a small stake in an unnamed oil-and-gas business, an individual retirement account and personal property such as furniture, according to Coffey and Ebbers's lawyer, David Wertheimer. The investors will sell the Ebbers estate, Pine Ridge Farm, in Brookhaven, Miss.
U.S. District Judge Denise Cote said the civil settlement in the biggest securities fraud settlement in U.S. history was "an excellent recovery" for the investors who sued Ebbers. Under the agreement, she said, Ebbers must surrender "assets that belong to others."
Money collected from the sale of Ebbers's assets will be divided between investors and Ashburn, Va.-based MCI Inc., WorldCom's successor company. Investors will receive 75 percent of most assets, and MCI will get 25 percent.
Ebbers will be allowed to keep enough to pay his lawyers.
Ebbers, 63, was convicted in Manhattan federal court of conspiracy, securities fraud and filing false statements with the U.S. Securities and Exchange Commission. Federal prosecutors have recommended that U.S. District Judge Barbara Jones in New York sentence him to life in prison.
WorldCom collapsed after revealing a three-year fraud in which the company artificially boosted revenue while hiding expenses in an effort to meet Wall Street expectations. Investors' lawyers alleged Ebbers directed what amounted to a $74 billion fraud at the company, including overstated goodwill.
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