Citigroup Offers To Settle WorldCom Litigation

by Glen Shapiro, LawAndTax-News.com, New York

12 May 2004

It emerged this week that Citigroup Inc. has offered to pay a $2.65 billion settlement over claims that its investment banking unit, Salomon Smith Barney, helped to disguise accounting fraud taking place at WorldCom (now MCI), and thus artificially inflate the firm's share price.

According to class action suits filed in the wake of the telecommunications firm's collapse, Salomon Smith Barney helped to cover up WorldCom's dwindling finances by making material misrepresentations in analyst reports, funnelled shares in popular initial public offerings (IPOs) to top WorldCom executives, and loaned former chief executive Bernard Ebbers many millions of dollars, in return for which, WorldCom sent its investment banking business to the Citigroup-owned operation.

If the settlement is approved by the judge presiding over the legal action, Denise Cote, a further 16 investment banks will be left facing the consolidated suits.

Speaking to the New York Law Journal this week, John Coffey of Bernstein Litowitz Berger and Grossman, the firm representing the class actions' lead plaintiff, the New York State Common Retirement Fund, observed that:

"This is a significant development because we now have, for the first time, a group of defendants who have decided to put this sad chapter behind them and pay a significant amount of money to victimized investors."

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