A federal judge gave preliminary approval Monday to a civil suit settlement under which former WorldCom chief Bernard Ebbers will pay $5 million and forfeit nearly all his personal assets.
U.S. District Judge Denise Cote gave her preliminary blessing to the deal just two days before Ebbers, 63, faces sentencing on his criminal conviction in the record $11 billion fraud at the telecommunications company WorldCom.
The civil settlement, struck late last month, springs from a lawsuit by investors who lost billions of dollars in the collapse of WorldCom in 2002.
Major investment banks that underwrote WorldCom securities, auditing firm Arthur Andersen and 12 former WorldCom board members have all also reached settlements and agreed to pay a total of more than $6 billion.
In the Ebbers deal, the former CEO will turn over nearly everything he owns, including his Mississippi mansion, to a trust that eventually will sell them for an expected $25 million to $40 million.
Ebbers must also pay $5 million up front. Small allowances will be made for his wife to have a modest living and to pay his legal bills, lawyers involved in the case have said.
Ebbers was convicted in March of fraud, conspiracy and other charges in the scandal at WorldCom, which collapsed into bankruptcy in 2002 and has since re-emerged under the name MCI Inc.
Prosecutors have asked a separate judge to follow a U.S. probation report that says Ebbers should get a life sentence for his crimes under federal sentencing guidelines.
But the Supreme Court ruled earlier this year that the guidelines are only advisory, not mandatory, and the judge could go substantially lower. Ebbers has asked for leniency, citing charitable works and heart trouble.
Five other former WorldCom executives face sentencing later this summer. Three of them are also defendants in the investor lawsuit.
The lead plaintiff in the investor suit is New York state Comptroller Alan Hevesi, acting as trustee of the state employees' retirement fund.
By Erin McClam
© 2005 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.