MCI Class Action Can Go Ahead, Court Rules

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

28 October 2003

Ruling in the US District Court for the Southern District of New York on Friday, District Judge Denise Cote cleared the way for a class action lawsuit against telecommunications company, MCI (formerly WorldCom).

In a 91 page opinion, Judge Cote granted class action status to investors who acquired shares in the firm between April 29, 1999 and June 25, 2002, during which period WorldCom is alleged to have made misleading statements about its financial position.

However, the move to allow disgruntled investors to unite their efforts has been vehemently opposed, both by MCI and by co-defendant Citigroup Financial Markets (formerly Salomon Smith Barney).

According to a Reuters report, the latter has argued that its telecommunications analyst, Jack Grubman should not be held responsible for the predicament of investors who lost money as a result of his misleading analysis, suggesting that as one of many analysts commenting on WorldCom, he could not individually have had any great impact on the firm's share price.

However, Judge Cote reportedly dismissed this argument, observing that:

"Nothing in the defendants' briefs addresses why Grubman was paid approximately $20 million a year in compensation by (Salomon) to be its telecommunications analyst if his analyst reports were irrelevant to the market."

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