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NEW YORK--MCI Inc. and 19 of its former executives have agreed to pay nearly $51 million to settle a class action lawsuit brought by workers who lost billions of dollars in retirement savings when a massive accounting scandal caused the telephone company formerly known as WorldCom Inc. to collapse, lawyers for the employees said.
Ashburn, Va.-based MCI, which changed its name from WorldCom earlier this year, emerged in April from Chapter 11 bankruptcy protection, after an $11 billion accounting fraud in July 2002 led the company to file the largest bankruptcy in U.S. history.
The settlement agreement was filed Tuesday in a New York federal court. If approved, MCI and its insurers will be required to submit $46.8 million to employees, according to a company spokeswoman.
MCI will pay roughly half that figure, she said.
The insurers that provided WorldCom with fiduciary liability coverage are: American International Group Inc.-owned National Union Fire Insurance Co., CNA Financial Corp.'s Continental Casualty Co. unit, the Twin City Fire Insurance Co. unit of Hartford Financial Services Group Inc. and Gulf Insurance Co., sources say.
In addition, as much as $4 million will be paid by former WorldCom Chief Executive Officer Bernard Ebbers, who also faces criminal charges for securities fraud, according to information supplied by Keller Rohrback L.L.P. in Seattle, which represented the employees.
The proposed settlement will cover between 45,000 and 50,000 employees who participated in WorldCom's 401(k) retirement plan during the period from Sept. 18, 1998, through July 21, 2002, according to a company spokeswoman. The retirement accounts were depleted due to their investments in WorldCom stock.
Employees are also suing WorldCom's plan administrator, Merrill Lynch Trust Co., a subsidiary of Merrill Lynch & Co., for approximately $100 million. If the proposed settlement is approved, Merrill Lynch will become the sole active defendant left in the case.