News Summary
Three public pension funds that filed a proposed class action against WorldCom Inc. have little chance of recovering their losses from the global communications giant, a Santa Monica attorney involved in similar securities cases said.
They may, however, have a shot at getting some money back from the banks that underwrote the corporate bonds, Paul Murphy said.
"It's very difficult to get anything [from WorldCom] but pennies on the dollar," said Murphy, who is involved in two lawsuits against Global Crossing. "That's the reality."
On Monday, the California Public Employees' Retirement System, the Los Angeles County Employees Retirement Association and the California State Teachers' Retirement System filed suit against WorldCom, its officers and directors and several banks. California Public Employees' Retirement System v. WorldCom Inc. BC277711 (L.A. Super. Ct., filed July 15, 2002).
The suit claims the pension funds would not have purchased millions of dollars worth of WorldCom bonds if the banks had investigated the figures provided by the once viable company in the bond registration statements and made sure they were not misleading.
The plaintiffs seek $318 million in damages for their losses on the bonds.
A spokeswoman for WorldCom said the company does not comment on pending litigation.
WorldCom is on the verge of bankruptcy, Murphy said. The pension funds most likely will be put ahead of shareholders if the company goes bust because there is usually some form of a buyout in a bankruptcy, he added.
The bank defendants in the suit are J.P. Morgan Chase & Co., CitiGroup Inc., ABN/AMRO Inc., Bank of America Corp. and Deutsche Bank AG. Bank of America spokeswoman Shirley Norton declined to comment on the class action, stating that no one from the company has seen a copy.
The claim against the banks, Murphy said, is an interesting and relatively new approach in investor lawsuits.
"It's a better angle because the banks had a duty to the bondholder," he said. "It's certainly an uphill battle, in my opinion, but certainly not one that is insurmountable.
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