Ebbers faces loss of almost everything
NEW YORK -- A judge gave her blessing Monday to a civil suit settlement under which former WorldCom chief Bernard Ebbers will forfeit nearly all his cash and personal assets -- as much as $45 million.
U.S. District Judge Denise Cote gave preliminary approval to the deal two days before Ebbers, 63, faces sentencing, and almost certain lengthy prison time, on his criminal conviction in the record WorldCom fraud.
The civil settlement, which springs from a lawsuit filed by angry former investors in the toppled telecom, will leave a modest Mississippi home for Ebbers' wife and roughly $50,000 for her to live on.
"Basically we left them with their furniture and the silverware," said Sean Coffey, a lawyer for New York state Comptroller Alan Hevesi, the lead plaintiff in the investor suit.
Major investment banks that underwrote WorldCom securities, auditing firm Arthur Andersen and 12 former WorldCom board members have all also reached settlements and agreed to pay a total of more than $6 billion.
In the Ebbers deal, the former CEO will turn over nearly everything he owns, including his mansion in Brookhaven, Miss., to a trust that eventually will sell the assets for an expected $25 million to $40 million. Ebbers must also pay more than $5 million cash up front.
Left for Ebbers' wife and family will be a much smaller home in Jackson, Miss., plus oil and gas assets and a retirement account described by lawyers in the case as very modest.
"It seems to me this is an excellent recovery for the class," Cote said in granting preliminary approval. She said Ebbers was "divesting himself of assets that rightfully belong to others."
Ebbers was convicted in March of fraud, conspiracy and other charges in the scandal at WorldCom, which collapsed into the largest bankruptcy in U.S. history in 2002 and has since re-emerged under the name MCI Inc.
Prosecutors have asked a separate judge to follow a U.S. probation report that says Ebbers should get a life sentence for his crimes under federal sentencing guidelines.
But the Supreme Court ruled earlier this year that the guidelines are only advisory, not mandatory, and the judge could go lower. Ebbers has asked for leniency, citing charitable works and heart trouble.
Five other former WorldCom executives face sentencing later this summer. Three of them are also defendants in the investor lawsuit.
Coffey told the judge yesterday that a deal is "very, very close" with two of those executives, but that "some issues" remain as lawyers try to strike a settlement with former WorldCom finance chief Scott Sullivan.