Alaska Elec. Pension Fund v. CitiGroup, Inc. (In re WorldCom Sec. Litig.)

Unprecedented Opt-Out Recovery

Robbins Geller’s clients pursued individual, non-class action lawsuits arising out of the financial collapse of WorldCom, Inc. and recovered more than $657 million to compensate them for losses on purchases of WorldCom bonds and stock during 1998-2001. As reported in the Associated Press, the “recovery represents up to 83% above what the funds and insurers would have received if they had remained part of the class action.”

The $657-million figure represents a net recovery for Robbins Geller’s clients; defendants paid counsel’s fees on top of the settlement. Moreover, the private-action plaintiffs received their checks just a few months after the settlement was announced. By contrast, class members waited much longer to receive payment as a result of time-consuming claims processing.

“These recoveries are unprecedented,” said Michael J. Dowd. “Our clients’ net recoveries on their WorldCom bond losses are substantially higher than the estimated recovery for the same bond losses in the WorldCom class action.”

According to Bloomberg News, “Investors in the main [class] got about 20 percent of their claimed $34.6 billion in damages [while the] breakaway investors [got] about 60 percent of the $1.1 billion in [losses] they claimed.”

The opt-out investors included about 75 public and private pension and benefit funds, joint employer employee funds, insurance companies and other institutional investors. The defendants in the suits were CitiGroup, J.P. Morgan, Deutsche Bank, Tokyo-Mitsubishi, ABN AMRO, WestLandes, BNP Paribas, Caboto, Mizuho, Bank of America, CSFB, Lehman, Goldman Sachs, UBS Warburg, Arthur Andersen and certain WorldCom officers and directors.

As part of the settlement, CitiGroup and J.P. Morgan joined plaintiffs to petition the SEC to create rules requiring increased disclosures in future securities offerings. These hard-won reforms include more information about loans to issuers and the issuers’ officers, increased information regarding allocation of IPO shares to the issuers’ insiders, and more information about research coverage underwriters will provide about issuers. “Our clients commend CitiGroup and J.P. Morgan for taking a leadership position and seeking increased disclosures which will benefit investors going forward. Our clients view this responsible action taken by these banks favorably,” said Dowd.

“We are very proud of these results,” Dowd added. “It shows how institutional investors can, in certain instances, use vigorously prosecuted individual actions to greatly enhance their recoveries beyond those obtained by passive reliance on class-action suits. These actions also show how securities litigation can be effectively used to obtain business practice changes to benefit investors.”

“Assistant Attorney General Paul Silver informs us that [our] recovery, as a passive member in the WorldCom class action, would have been less than $1 million. We are very pleased that [Robbins Geller Rudman & Dowd LLP’s] efforts led to the WSIB receiving $16.4 million in settlement recoveries . . . [and] the defendants also paying the $1.6 million in attorney’s fees and litigation related costs on behalf of the WSIB. . . . Quite simply, we are impressed by the aggressive, diligent and creative work of your firm,” said Joseph A. Dear, former Executive Director of the Washington State Investment Board.

Alaska Elec. Pension Fund v. CitiGroup, Inc. (In re WorldCom Sec. Litig.), No. 03 Civ. 8269 (S.D.N.Y.)