UBS Dismissed From WorldCom Class Action

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

12 January 2004

Investment bank UBS, which helped to sell securities linked to the stock price of collapsed telecommunications firm, WorldCom Inc. (now MCI), has been dismissed by Southern District of New York Judge, Denise Cote from the class actions filed by aggrieved WorldCom investors.

According to reports, the bank had issued investment instruments known as GOALs, which were notes which paid an annual interest rate of 12% over a 2 year period, with the amount of the principal set to be repaid dependent on the performance of the telecom firm's stock.

Plaintiffs in the class actions filed after WorldCom's collapse accused UBS of violating Section 11 of the 1933 Securities Act by citing historical figures provided by WorldCom in a prospectus supplement for GOALs. They claimed that the investment bank was party to the fraud committed by the company because the historical stock prices had been artificially inflated.

The New York Law Journal reported, however, that Judge Cote drew attention to the fact that the supplement in question announced that UBS did not know whether WorldCom had made proper disclosure prior to the calculation of the figures, and furthermore, advised investors to undertake their own investigations of the company before making any investment decisions.

In the prospectus settlement, the bank also stated that it had not been party to the preparation of any of WorldCom's public filings, and that it had not performed due diligence in connection with its GOALs offering.

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