WorldCom Suit Will Involve Ex-Exec And Merrill LynchJun 19, 2003 | Bloomberg News
Merrill Lynch & Co. and WorldCom's former chief executive, Bernard Ebbers, failed in a bid to dismiss a suit filed last year by employees of the second-largest long-distance company who lost money on pension-plan stock.
U.S. District Judge Denise Cote in New York ruled that Merrill, the world's largest securities firm, and Ebbers must stand trial in the suit. The judge said that both may have violated their fiduciary duty to employees who had company pension plans that included WorldCom stock. Merrill and WorldCom, which changed its name to MCI Inc., administered the pension plan.
Merrill Lynch "retained the discretion, and indeed the obligation, to follow only proper directions of the investment adviser," Cote wrote in her 49-page ruling filed late Tuesday.
WorldCom employees should have the opportunity to show at trial that Merrill was wrong to follow investment instructions from Ebbers or other company officials that it knew might damage the financial interests of employees, she said.
The U.S. Securities and Exchange Commission charged WorldCom with fraud last June after the company admitted it misstated $3.85 billion in revenue and expenses over five quarters ending in early 2002. The SEC's tally of WorldCom misstatements has since increased to about $11 billion, dating back to 1999.
Ebbers encouraged WorldCom employees to retain WorldCom stock in their pension plans as the share value declined, lawyers for the employees said. WorldCom filed the biggest corporate bankruptcy in U.S. history last July.
Employees did not specify in their suit the damages they seek. WorldCom lost $183.2 billion in value from its market high of $61.99 on June 21, 1999, until its bankruptcy filing.