Valley Lawyer Has Opinion On Worldcom SuitJul 29, 2004 | The Dessert Sun Investors in the ill-fated former telecom giant WorldCom have until Sept. 1 to sign on to a $2.65 billion class-action settlement, but a Palm Desert attorney is advising former shareholders to consider pursuing separate claims.
"Generally, it would be worth it to go for a larger settlement if you have $10,000 or more in losses," said Palm Desert lawyer Walter Clark.
The Walter Clark Legal Group is among several across the country that are processing opt-outs from class-action suits involving WorldCom and Citigroup, which was accused of misrepresenting Worldcom’s financial health to investors. Worldcom filed for bankruptcy protection in 2002, following revelations that it inflated its first-quarter 2002 earnings by about $3.8 billion.
Citigroup agreed in May to a $2.65 billion settlement with WorldCom investors, making it one of the largest securities fraud settlements ever.
Clark and other attorneys contend that many investors may recoup considerably more of their losses by opting out of the May settlement.
"A lot of people in the Coachella Valley have those kinds of investments," Clark said.
Earlier this month, New York federal district court Judge Denise Cote set the deadline for shareholders to file forms if they wish to opt out of the settlement.
The class action affects anyone who bought WorldCom stock or bonds between April 29, 1999, and June 25, 2002.
The exact number of investors affected by the class action is not known. Clark said many investors held the stock in 401(k) or other retirement plans where they did not trade the stock directly and may have no idea what their losses were.
The attorney said investors need to check with a certified public accountant or other financial advisor to determine whether opting out of the settlement will be worthwhile.
For instance, Clark noted that current tax laws allow individuals to write off up to $3,000 in investment losses in a single year, and also to carry over some losses to future years. By opting out of the settlement, some investors could be putting their write-offs at risk. Also, legal costs of pursuing a larger settlement may not make the effort feasible.
New York attorney Herbert Waichman, whose firm Parker & Waichman has handled other high-profile cases involving the Word Trade Center attacks and the 1999 Egypt Air jet crash, said there are potentially "tens of thousands" of financial victims in the 2002 collapse of WorldCom.
"If you look at the losses that investors saw, the defendants got off much too lightly," Waichman said.
Orlando, Fla., attorney James Hooper, whose law firm Hooper & Weiss is part of a consortium of East Coast law firms handling opt-outs, said stock losses from the WorldCom collapse totaled more than $100 billion.
As it stands, Hooper said the May settlement will let investors recoup not much more than a penny on the dollar. Pursuing an individual claim could bring that up to 2 to 4 cents on the dollar or possibly more, he said.
Hooper said the consortium has so far processed about 4,000 opt-outs since the class-action settlement was announced.
Citigroup attorneys are sending out notices to affected investors, asking them to fill out a proof of claim form to collect part of the settlement.
Waichman said anyone who has already opted out should not send in the claim form, which will essentially opt the investor back into the settlement.
Last year Salomon Smith Barney, a Citigroup unit now known as Citigroup Global Markets, was fined $300 million following a wide-scale investigation by the New York attorney general’s office into the practices of several financial services firms.
Regulators accused Salomon Smith Barney of misrepresenting stock ratings to investors in a way that benefited their investment banking clients, which included WorldCom.
WorldCom emerged from Chapter 11 protection in April and has changed its name to MCI.
On Wednesday, Citigroup spokeswoman Shannon Bell said the New York-based company would have no comment on the settlement process.
The final settlement agreement, reached in May with the help of federal mediators, said that Citigroup denied committing any violation of law and agreed to the settlement solely to eliminate the uncertainties and expense of further protracted litigation.