• United States
by Juan Carlos Perez

Citigroup settles WorldCom shareholder suit for $1.6 billion

May 10, 20042 mins

Citigroup has let its wallet do the talking in a resolution to a class-action lawsuit brought against it by WorldCom investors.

Citigroup on Monday said it has agreed to pay $2.65 billion, or $1.64 billion after taxes, to settle a class-action lawsuit from purchasers of WorldCom stock and bonds against Citigroup in the U.S. District Court for the Southern District of New York.

The plaintiffs included investors who purchased or acquired publicly traded WorldCom securities between April 29, 1999 and June 25, 2002.

As part of the agreement, Citigroup denies having violated the law and establishes that it entered into the settlement to “eliminate the uncertainties, burden and expense of further protracted litigation,” Citigroup said in a statement.

Citigroup will take an after-tax charge of $4.95 billion, or $0.95 per share, in the second quarter of 2004, which includes the WorldCom settlement as well as litigation reserves for lawsuits and other legal proceedings it faces.

WorldCom filed for bankruptcy in July 2002 in the midst of a massive multibillion dollar accounting scandal. It continued operating under Chapter 11 of the U.S. Bankruptcy Code and changed its name to MCI Inc. when it emerged from bankruptcy last month.

The scope of WorldCom’s financial woes didn’t become entirely clear until March of this year, when the company disclosed it lost $48.9 billion in 2000, $15.6 billion in 2001, and $9.2 billion in 2002.