The last defendant standing in the WorldCom securities fraud litigation stood down on Monday as Arthur Andersen announced that it had settled with the WorldCom class for $65 million. The settlement occurred at the beginning of the fifth week of what amounted to an auditing malpractice case against Andersen.
The settlement was apparently reached after Andersen disclosed its limited financial resources to the WorldCom plaintiffs, which should not have been any surprise to the plaintiffs. After having been convicted of witness tampering in a dubious government prosecution in connection with the Enron scandal, Andersen collapsed as a going concern and is now merely a liquidating trust for its former partners. Andersen is still contending with similar civil litigation in connection with its audits of Qwest Communications International Inc., Global Crossing Ltd., and the Big Kahuna, Enron.
As noted in these previous posts over the past year, Andersen was the last of more than two dozen defendants who agreed to pay a total of $6 billion to settle securities fraud claims in connection with WorldCom’s collapse into bankruptcy in 2002. That total amount is a record recovery in a securities class action in the United States, but that record is probably short-lived. The aggregate settlements in the similar class action in the Enron case projects to lap the WorldCom record by several billion.