Multimillion Dollar Fines & Settlements Paid by Corporations

corporations with names beginning U through Z

click here for corporations A to F

click here for corporations G to M

click here for corporations N to T

compiled by George Draffan

Endgame

 

Note: this list is not complete.

Please send additions to Endgame

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UBS Paine Webber

2002

$50,000,000

FOR MORE INFO SEE ENTRY: Citigroup - 2002 - $300,000,000

UBS Warburg

2003

 $80,000,000

$1.4 Billion Wall Street Settlement Unveiled. "As part of the settlement, two former research analysts -- telecommunications expert Jack Grubman of Citigroup's Salomon Smith Barney and Internet expert Henry Blodget of Merrill Lynch & Co. -- agreed to pay $15 million and $4 million, respectively, and be permanently barred from the securities industry. The $1.4 billion settlement amount is among the highest ever imposed by securities regulators, and Citigroup's $400 million share of that settlement is the highest ever imposed on an individual firm. It follows a nearly two-year investigation started by Spitzer and later joined by the SEC and other state attorneys general.... Adding to Citigroup's $400 million, Merrill Lynch and Credit Suisse First Boston will each contribute $200 million toward the global settlement. The other firms -- Bear, Stearns & Co. Inc.; Goldman, Sachs & Co.; Lehman Brothers Inc.; J.P. Morgan Securities Inc.; Morgan Stanley & Co. Inc.; UBS Warburg LLC; and U.S. Bancorp Piper Jaffray Inc. -- will pay between $125 million and $32.5 million. About $387 million will go toward a fund to benefit customers of the firms. Another $387 million will be paid to the states. In addition, the firms will pay some $433 million to fund independent research and $80 million to promote investor education. ($1.4 Billion Wall Street Settlement Unveiled, by Tamara Loomis, New York Law Journal, April 29, 2003). See also SEC Releases Brokerage Settlement Details. Associated Press, April 28, 2003.

"Six months after securities regulators and 10 of Wall Street's biggest banks signed a landmark $1.4 billion conflict-of-interest settlement, a federal judge approved the deal Friday, clearing the way for harmed investors to recoup $399 million... The SEC, industry self-regulatory groups and 25 other states eventually joined the investigation. Firms agreeing to settle included Merrill, Citigoup Inc., Morgan Stanley, J.P. Morgan Chase, Goldman Sachs, Bear Sterns, Credit Suisse First Boston, Lehman Brothers, Piper Jaffray and UBS Warburg. Spitzer has gone on to lead regulatory probes into alleged trading abuses by mutual fund firms. In both the research and mutual fund cases, Spitzer seized on behavior long recognized by Wall Street but largely ignored by regulators. As part of the "global settlement," the firms were ordered to pay $894 million in penalties and disgorgement as well as $432.5 million to fund the purchase and distribution of independent research and $80 million to fund investor education programs." ($1.4 Billion Wall Street Settlement Approved: Federal Judge Accepts Conflict-of-Interest Deal. By Ben White, Washington Post, Nov. 1, 2003, p. E1).

The $1.4 billion settlement is divided so:
Citigroup/Salomon Smith Barney: $400,000,000
Credit Suisse First Boston: $200,000,000
Merrill Lynch: $200,000,000
Morgan Stanley: $125,000,000
Goldman Sachs Group: $110,000,000
Lehman Brothers Holdings: $80,000,000
J.P. Morgan Chase: $80,000,000
Bear Stearns: $80,000,000
UBS Warburg: $80,000,000
U.S. Bancorp Piper Jaffray: $32.500,000

UBS

2004

$100,000,000

UBS, Switzerland's largest bank, had transferred $4 billion to $5 billion to four other countries that were under sanctions: Libya, Iran, Cuba and the former Yugoslavia. Over an eight-year period, UBS employees had quietly shipped the money to those countries from a vault at the Zurich airport, undetected by Fed auditors who made regular visits to the site. EARLY last month, the Federal Reserve Board fined UBS $100 million for the currency violations. It was the second-largest penalty ever levied by America's central bank, surpassed only by a $200 million fine imposed on the Bank of Credit and Commerce International, or B.C.C.I., in 1991 for violating American banking laws. The B.C.C.I. case was part of a global investigation of fraud and money laundering. UBS's transgressions don't appear to be in the same league as those at B.C.C.I. Several people briefed on the transfers said most of the UBS transactions involved currency exchanges for the Cuban tourism industry; such transactions anger Washington but do not evoke security fears in most of the world. A handful of lower-level UBS employees are said to have doctored trading records that misled their employers and American officials. All of them have been fired or have left the bank. UBS has not been charged with any crimes in the matter. A former Fed official and others involved in the investigation say the hefty fine reflects the Fed's displeasure at having been misled by UBS employees for so many years. Members of Congress have accused the Fed of being asleep at the regulatory switch, an added incentive for a marquee-size fine at a time when regulators of all stripes have come under fire for overlooking abuses and excesses on Wall Street. Yet UBS's trades with Libya, Iran and Yugoslavia, and the investigation into how hundreds of millions of dollars circumvented sanctions and regulatory barriers on their way to Baghdad, are hardly trivial affairs..." (Lockboxes, Iraqi Loot and a Trail to the Fed, By Timothy L. O'Brien, New York Times, June 6, 2004).

UCAR International

199?

$110,000,000

Multinational Monitor, July/August 1999

Ultramar Diamond Shamrock subsidiary TPI Petroleum

2000

$13,900,000

"TPI Petroleum Inc. will spend $9.9 million on two community environmental projects in Alma and St. Louis, Mich., designed to clean up local waterways and promote the reuse of contaminated property in downtown Alma, under a settlement filed today in federal district court in Bay City, Mich. TPI will also work with the EPA and the Michigan Department of Environmental Quality to permanently clean up contaminated soil and groundwater resulting from the operations of TPI's refinery in Alma.
Under the agreement, TPI will pay a civil penalty of $4 million, one of the largest penalties ever paid in the Midwest for environmental violations at a single facility. The agreement resolves claims that TPI illegally polluted the air, water, and land prior to the time that TPI closed the Alma refinery in October of 1999.
For one of the community projects, TPI will place $9 million into an escrow account that will be used exclusively to clean up selected areas of the Pine River and Horse Creek, both of which are located in central Michigan. TPI will perform a study to determine the nature and extent of the contamination on these local waterways and will propose how to clean up the areas that are found to be the most polluted. TPI will work with the EPA to develop the specific cleanup plan that will be implemented.
TPI will also do a $900,000 "brownfield" project. After assessing the environmental quality of approximately 11 acres in downtown Alma, TPI will restore and protect the property in a manner agreed to between TPI and the City of Alma. EPA will monitor and approve all proposed activities...
The complaint that was resolved by today's agreement alleges that TPI violated multiple requirements of the Clean Air Act by discharging volatile organic compounds (VOCs), nitrogen oxides, sulfur dioxide, carbon monoxide, and particulate matter in excess of state and federal limitations and TPI's own air permits. VOCs and nitrogen oxides are pollutants that contribute to the formation of ground-level ozone smog that irritates lungs, eyes and sinuses. Sulfur dioxide can affect human health, especially among asthmatics, and can harm vegetation and metals. Sulfur dioxide and nitrogen oxides cause acid rain.
The complaint also alleges that TPI violated numerous provisions of the Clean Water Act, including that TPI had polluted Horse Creek and Pine River with wastewater that was toxic to fish and invertebrates. Finally, the complaint alleges that TPI violated the Resource Conservation and Recovery Act by failing to properly handle, store, and dispose of hazardous wastes, and that TPI violated the Safe Drinking Water Act by failing to properly monitor and report on a well that received wastewater from refinery operations.
TPI is owned by Ultramar Diamond Shamrock (UDS). Four other subsidiaries of UDS - Diamond Shamrock Refining Company, Diamond Shamrock Refining and Marketing Company, Sigmor Pipeline Company, and TPI Pipeline Corporation -- were also named in the complaint for discharging excess VOCs from storage tanks in Michigan, Texas, and Oklahoma. Under the settlement, TPI and these other UDS subsidiaries will place controls on the storage tanks creating the pollution." (
US DOJ, April 21, 2000).

Union Carbide

1989

$470,000,000

On February 14, 1989, the Supreme Court of India ordered a $470 million payment for the December 3, 1984 methyl isocyanate gas release from a Union Carbide plant which killed thousands of people at Bhopal, India. More history.

Unisys

199?

$5,000,000

Multinational Monitor, July/August 1999

Unisys (formerly Sperry)

1989

$190,100,000

US Dept of Justice / Pentagon "ILL Wind" case.

United Airlines

2004

$36,500,000

"A federal judge has ordered United Airlines to pay $36.5 million to settle a sex discrimination lawsuit brought by 13 former flight attendants over the airline's longtime policy that limited how much they could weigh. The settlement, approved by a U.S. District Court judge in December 2002 but suspended after United filed for bankruptcy that month, was reinstated Wednesday. The settlement was reached after the 9th U.S. Circuit Court of Appeals ruled in 2000 that United's weight policy for flight attendants, in place from 1980 to 1994, discriminated against women. Under the policy, United imposed weight limits on flight attendants of both genders, but set stricter standards for women. All 13 plaintiffs, who filed the suit in 1992, worked for the airline while the weight policy was in effect and were disciplined or fired by United for violating it." (United Airlines: Weight policy suit to cost $36.5 million. Associated Press, Chicago Tribune, Feb 13, 2004).

UnitedHealth

2004

$9,700,000

"U.S. prosecutors on Thursday said Citigroup Inc. and UnitedHealth Group Inc. agreed to pay $20.6 million to settle charges they overbilled the government for reimbursements on Medicare expenses. At issue were charges that Citigroup's (C: Research, Estimates) Travelers Insurance Co. and UnitedHealth's (UNH: Research, Estimates) United Healthcare Insurance Co. submitted false figures to the government during a 12-year period, overcharging the Medicare program for reimbursements such as processing claims by physicians. Under the settlement, Travelers will pay $10.9 million and United Healthcare will pay $9.7 million. Neither company admitted to any of the charges as part of the settlement." (Reuters/CNNMoney.com, Aug 12, 2004).

United States Sugar Corporation

199?

$3,750,000

Multinational Monitor, July/August 1999

United Technologies

199?

$3,000,000

Multinational Monitor, July/August 1999

United Technologies Corporation

199?

$2,000,000

Multinational Monitor, July/August 1999

Unocal

199?

$1,500,000

Multinational Monitor, July/August 1999

UnumProvident

2004

$15,000,000

For inappropriately denying claims for benefits.

US Bancorp Piper Jaffrey

2003

 $32.500,000

$1.4 Billion Wall Street Settlement Unveiled. "As part of the settlement, two former research analysts -- telecommunications expert Jack Grubman of Citigroup's Salomon Smith Barney and Internet expert Henry Blodget of Merrill Lynch & Co. -- agreed to pay $15 million and $4 million, respectively, and be permanently barred from the securities industry. The $1.4 billion settlement amount is among the highest ever imposed by securities regulators, and Citigroup's $400 million share of that settlement is the highest ever imposed on an individual firm. It follows a nearly two-year investigation started by Spitzer and later joined by the SEC and other state attorneys general.... Adding to Citigroup's $400 million, Merrill Lynch and Credit Suisse First Boston will each contribute $200 million toward the global settlement. The other firms -- Bear, Stearns & Co. Inc.; Goldman, Sachs & Co.; Lehman Brothers Inc.; J.P. Morgan Securities Inc.; Morgan Stanley & Co. Inc.; UBS Warburg LLC; and U.S. Bancorp Piper Jaffray Inc. -- will pay between $125 million and $32.5 million. About $387 million will go toward a fund to benefit customers of the firms. Another $387 million will be paid to the states. In addition, the firms will pay some $433 million to fund independent research and $80 million to promote investor education. ($1.4 Billion Wall Street Settlement Unveiled, by Tamara Loomis, New York Law Journal, April 29, 2003). See also SEC Releases Brokerage Settlement Details. Associated Press, April 28, 2003.

"Six months after securities regulators and 10 of Wall Street's biggest banks signed a landmark $1.4 billion conflict-of-interest settlement, a federal judge approved the deal Friday, clearing the way for harmed investors to recoup $399 million... The SEC, industry self-regulatory groups and 25 other states eventually joined the investigation. Firms agreeing to settle included Merrill, Citigoup Inc., Morgan Stanley, J.P. Morgan Chase, Goldman Sachs, Bear Sterns, Credit Suisse First Boston, Lehman Brothers, Piper Jaffray and UBS Warburg. Spitzer has gone on to lead regulatory probes into alleged trading abuses by mutual fund firms. In both the research and mutual fund cases, Spitzer seized on behavior long recognized by Wall Street but largely ignored by regulators. As part of the "global settlement," the firms were ordered to pay $894 million in penalties and disgorgement as well as $432.5 million to fund the purchase and distribution of independent research and $80 million to fund investor education programs." ($1.4 Billion Wall Street Settlement Approved: Federal Judge Accepts Conflict-of-Interest Deal. By Ben White, Washington Post, Nov. 1, 2003, p. E1).

The $1.4 billion settlement is divided so:
Citigroup/Salomon Smith Barney: $400,000,000
Credit Suisse First Boston: $200,000,000
Merrill Lynch: $200,000,000
Morgan Stanley: $125,000,000
Goldman Sachs Group: $110,000,000
Lehman Brothers Holdings: $80,000,000
J.P. Morgan Chase: $80,000,000
Bear Stearns: $80,000,000
UBS Warburg: $80,000,000
U.S. Bancorp Piper Jaffray: $32.500,000

Visa

2003

 

Visa USA, facing a trial over its debit card fees, said last night that it had agreed to settle a class-action lawsuit brought by retailers, two days after a similar deal was reached by MasterCard. Under the terms of the settlement, Visa will pay $2 billion to retailers and will reduce the fees it charges merchants on some debit card purchases, according to a person close to the retailers' legal team. MasterCard, under its settlement, agreed to pay $1 billion and also agreed to cut its fees, the company confirmed last night. Both will also pay $25 million immediately... Visa and MasterCard were scheduled to go to trial this week in a class-action lawsuit brought by Wal-Mart, Sears and other retailers in 1996. They contended that Visa and MasterCard used their dominance in the credit card market to force merchants to accept both credit and debit cards and to exact excessive fees on debit card transactions. Under the agreements, which Mr. Balto called one of the largest antitrust settlements ever, both Visa and MasterCard agreed to give retailers the choice of accepting one or both kinds of cards." (Jennifer Bayot, Visa to Pay Retailers $2 Billion and Cut Fees, New York Times, May 1, 2003).

Wachovia Securities

2004

$4,800,000

"Fifteen brokerage firms accused of overcharging large-scale investors in mutual funds have reached settlements with regulators that will require them to pay civil penalties totaling some $21.5 million, the regulators announced Thursday. The settlements with the Securities and Exchange Commission and the National Association of Securities Dealers also will require the brokerages to make refunds to customers. The fines levied on the firms are equivalent to the estimated amount they overcharged customers over a two-year period, the regulators said. The firms include American Express Financial Advisors, which agreed to pay a $3.7 million fine; Raymond James Financial Services, which is paying $2.6 million; and Wachovia Securities, $4.8 million. The SEC and the NASD, the brokerage industry's self-policing group, have found that brokerage firms - apparently inadvertently - often fail to give large-scale investors in mutual funds the discounts they are owed." (15 brokerages settle fund discounts case: Firms accused of overcharging agree to pay $21.5 million. Associated Press, MSNBC News, Feb 12, 2004).

"WALL STREET"

2003

$894,000,000

$432,500,000

$80,000,000

"Six months after securities regulators and 10 of Wall Street's biggest banks signed a landmark $1.4 billion conflict-of-interest settlement, a federal judge approved the deal Friday, clearing the way for harmed investors to recoup $399 million... The SEC, industry self-regulatory groups and 25 other states eventually joined the investigation. Firms agreeing to settle included Merrill, Citigoup Inc., Morgan Stanley, J.P. Morgan Chase, Goldman Sachs, Bear Sterns, Credit Suisse First Boston, Lehman Brothers, Piper Jaffray and UBS Warburg. Spitzer has gone on to lead regulatory probes into alleged trading abuses by mutual fund firms. In both the research and mutual fund cases, Spitzer seized on behavior long recognized by Wall Street but largely ignored by regulators. As part of the "global settlement," the firms were ordered to pay $894 million in penalties and disgorgement as well as $432.5 million to fund the purchase and distribution of independent research and $80 million to fund investor education programs." ($1.4 Billion Wall Street Settlement Approved: Federal Judge Accepts Conflict-of-Interest Deal. By Ben White, Washington Post, Nov. 1, 2003, p. E1).

The $1.4 billion settlement is divided so:
Citigroup/Salomon Smith Barney: $400,000,000
Credit Suisse First Boston: $200,000,000
Merrill Lynch: $200,000,000
Morgan Stanley: $125,000,000
Goldman Sachs Group: $110,000,000
Lehman Brothers Holdings: $80,000,000
J.P. Morgan Chase: $80,000,000
Bear Stearns: $80,000,000
UBS Warburg: $80,000,000
U.S. Bancorp Piper Jaffray: $32.500,000

Wal-Mart

2000

$50,000,000

"Wal-Mart, the world's largest retailer, forced employees to work unpaid overtime between 1994 and 1999, a federal jury found [December 18, 2002]. The lawsuit in U.S. District Court accused Wal-Mart Stores Inc. of violating federal and state wage laws. The jury did not rule on monetary damages, which will be decided in a separate trial. More than 400 employees from 24 of Wal-Mart's 27 Oregon stores sued the retailer. It was the first of several similar suits across the country to come to trial... Attorneys said the verdict could determine the fate of 39 other class-action lawsuits pending against the company in 30 states. Those suits, spread from California to New York, involve hundreds of thousands of workers seeking tens of millions in back pay. Previously, Wal-Mart settled two similar overtime cases in Colorado and New Mexico. The company reportedly paid $50 million two years ago to settle an off-the-clock lawsuit covering 69,000 workers in Colorado, and it recently settled for $500,000 a case involving 120 workers in Gallup, N.M., said one of the plaintiff's attorneys." (William McCall, Wal-Mart Found Guilty in Overtime Case, Associated Press, Dec 19, 2002).

Wal-Mart

2005

$11,000,000

"Wal-Mart Stores Inc. has agreed to pay $11 million to settle federal allegations it used illegal immigrants to clean its stores... Since 1998, federal authorities have uncovered the cases of at least 250 illegal immigrants who were employed by janitor contracting services and hired by the giant retailing chain in 21 states. Many of the janitors -- from Mexico, Russia, Mongolia, Poland and a host of other nations -- worked seven days or nights a week without overtime pay or injury compensation... Those who worked nights were often locked in the store until the morning... The $11 million settlement clears Wal-Mart of federal allegations of hiring the illegal immigrants... Officials said at the time of the raids the investigation involved wiretaps that revealed Wal-Mart executives were aware that the subcontractors used illegal workers... An employer can face civil and criminal penalties for knowingly hiring illegal immigrants or failing to comply with certain employee record-keeping regulations..." (CBSNews.com, March 18, 2005).

Warner-Lambert

199?

$10,000,000

Multinational Monitor, July/August 1999

Warner-Lambert

199?

$3,000,000

Multinational Monitor, July/August 1999

Warner-Lambert

2004

$430,000,000

see Pfizer

Warner Music Group

2005

$5,000,000

Warner Music Group Corp. has agreed to pay $5 million to settle an investigation into payoffs for radio airplay of artists... The money that Warner Music has agreed to pay will be distributed by the Rockefeller Philanthropy Advisors to New York State to fund music programs in the state.... A 1960 federal law and related state laws bar record companies from offering undisclosed financial incentives in exchange for airplay. The practice was called "payola," a contraction of "pay" and "Victrola," the old wind-up record player. In July, industry titan Sony BMG Music Entertainment agreed to pay $10 million and stop bribing radio stations to feature artists in what a state official called a more sophisticated generation of the payola scandals of decades ago. Sony BMG had said some of its employees had engaged in "wrong and improper" practices. Spitzer said he hadn't sought criminal charges in the Sony case because criminal laws governing pay-for-play are more specific and difficult to violate than the civil laws. In July, federal regulators began taking a closer look at the payola scandal that led to Spitzer's $10 million settlement by Sony BMG Music Entertainment. Federal Communications Commission Chairman Kevin Martin promised swift action against anyone violating rules against "pay-for-play" in the music industry... Companies in the recording industry depend heavily on airplay for their artists. It boosts sales by encouraging listeners to buy their music and helps them climb the charts, which are based on airplay. The practice today is more sophisticated than in the 1950s and '60s payola scandals, most of which involved direct payments of cash to DJs in exchange for airplay, Spitzer has said.
Payola is in the form of "direct bribes" to radio programmers, including airfare, electronics, iPods, tickets to top sporting events and concerts; as well as payments to radio stations for expenses and for use in contests. He also said companies have hired "independent promoters" to act as conduits for payments to radio stations and pay for "spin programs" to increase airplay of some recordings that are supposed to be based on popularity among listeners. Last summer, Spitzer asked for documents from EMI Group PLC, Warner Music Group and Vivendi Universal SA's Universal Music Group. (AP / Los Angeles Times, Nov 22, 2005).

Waste Management subsidiary Chemical Waste Management.

1989

$3,750,000

CWM was levied a proposed fine of $4,475,000 [they paid $3.75 million] for numerous violations at its Chicago hazardous waste incinerator.

WellPoint

2005

$198,000,000

$250,000,000

"Seeking peace in a long-running war between doctors and insurers, WellPoint, the nation's largest health insurer, announced a settlement yesterday with 700,000 doctors who had accused the company of interfering in medical decisions and of routinely underpaying hospitals and physicians. Under the settlement, WellPoint will pay $198 million in cash and invest $250 million in information technology and procedural changes to resolve disputes with doctors and pay claims more promptly." (New York Times, July 12, 2005).

Williams Companies

2006

$290,000,000

Natural gas and pipeline company Williams Cos. Inc. (NYSE:WMB) on Tuesday said it has struck a deal to settle class-action lawsuits filed for people who bought Williams stock between July 2000 and July 2002. Williams said it will pay $290 million to settle, subject to court approval, with anywhere from $145 million to $220 million of that in cash and the rest funded by insurers. The settlement does not include any admissions of liability or violations of securities laws. The company said it expects a second-quarter after-tax charge of $98 million to $148 million, or 16 cents to 24 cents per share. Preliminary approval from a federal court in northern Oklahoma is expected as soon as mid-August. (Reuters, June 13, 2006)

Wisconsin Electric Power Company

2003

$3,200,000 fines

$600,000,000 in pollution controls

The Wisconsin Electric Power Company has agreed to spend an estimated $600 million over the next 10 years to reduce pollution at five coal-burning power plants in Wisconsin and Michigan. It is the second electric utility in the last two weeks, after Dominion Virginia Power, to reach an agreement with the government over the Clean Air Act's "new source review" provisions, which govern emission control requirements at aging power plants. Announcing the accord today, the Justice Department and the Environmental Protection Agency said the company, a division of the Wisconsin Energy Corporation, had made millions of dollars in renovations to its plants but had failed to install the pollution controls that "new source review" requires of such renovation. Under the agreement, the company is to reduce its annual air pollution by 105,000 tons by 2013, cutting 74 percent of its acid-rain-causing sulfur dioxide and 67 percent of its smog-inducing nitrogen oxide. In addition, it will pay $3.2 million in fines and spend at least $20 million to test technology to remove mercury from coal. (New York Times, April 30, 2003).

 WorldCom

2003

$500,000,000

WorldCom pays record $500m to settle fraud The Guardian (UK), May 20, 2003. "WorldCom, the telecoms company that collapsed in spectacular fashion last year, is set to pay a $500m penalty to financial regulators in the U.S., fifty times higher than the previous record-breaking fine against a corporation. The agreement with the securities and exchange commission settles charges that the company misled shareholders with more than $11bn in accounting fraud. WorldCom filed for the biggest ever bankruptcy shortly after evidence of an accounting scandal began to emerge almost 12 months ago. The penalty is intended to reflect the size of the alleged fraud and to demonstrate the SEC's determination to punish corporate wrongdoing. The company was inflating revenues and overstating profits. The previous biggest penalty paid by a corporation in a settlement with the SEC was $10m by copier-maker Xerox last year for manipulating revenues. The actual size of the fine against WorldCom is $1.5bn, but the bankruptcy court will reduce that to $500m.... But the settlement with the SEC would clear the way for the company, which is renaming itself MCI, to emerge from bankruptcy. The company filed a reorganisation plan last month to reduce debts of $41bn to just $4.5bn."
WorldCom Agrees to Pay $500 Million Washington Post, May 20, 2003.
MCI Agrees to Pay $500 Million In Fraud Case, S.E.C.'s Largest By Stephen Labaton, New York Times, May 20, 2003.

WorldCom

2005

$54,000,000

"Former WorldCom directors have agreed to pay investors $18 million from their own pocket as part of a... $54 million settlement with investors who lost billions... The direct payments by the board members -- equaling about one-fifth of each one's personal net worth -- are a highly unusual concession in a securities case. And yet the deal also marks the third such arrangement in resolving the most egregious corporate scandals of recent years: directors at Enron Corp., Global Crossing Ltd. and now WorldCom have agreed to personally chip in to restore a small fraction of the gigantic losses suffered by investors and employees." (New York Times, jan 7, 2005).

WorldCom

former members of board of directors

2005

$20,000,000

"A landmark agreement by former WorldCom directors to pay millions of their own money to settle with investors was revived yesterday about six weeks after it was scuttled by objections from other defendants in the case.
Under the terms of the settlement, which was reached early yesterday evening, 11 former WorldCom directors will pay $20 million out of their own pockets to settle with Alan G. Hevesi, comptroller of New York and trustee of the state's Common Retirement Fund. Mr. Hevesi is lead plaintiff in the civil suit representing hundreds of thousands of investors who held WorldCom stock and bonds in the years immediately before its bankruptcy filing in 2002.
If the settlement is approved by the court, it will bring to $6.057 billion the total amount recovered from defendants by Mr. Hevesi in the case.
The initial deal between the directors and Mr. Hevesi was announced in January and was viewed as a rare case of investors holding directors accountable for problems occurring on their watch. But the agreement fell apart in early February, when the judge overseeing the case ruled that an aspect of the deal was illegal because it would have limited the directors' potential liability and exposed other defendants in the case to larger damages.
Because all the banks in the case have now settled with Mr. Hevesi, the impediment to the directors' settlement was removed. J. P. Morgan Chase, a lead banker to WorldCom, settled on Wednesday. It was the last major bank to settle.
"We are delighted that with the last of the bank settlements, we can now revive this historic settlement and proceed to trial against WorldCom's former auditor, Arthur Andersen, and its former chairman, Bert Roberts," Mr. Hevesi said in a statement.
The former directors that were a part of yesterday's settlement are Clifford L. Alexander Jr., secretary of the Army under President Jimmy Carter and later chief executive of Dun & Bradstreet; James C. Allen, former chief executive of Brooks Fiber Properties, a telecommunications company acquired by WorldCom; Judith Areen, a former Georgetown Law Center dean.
Also, Carl J. Aycock, an early investor in WorldCom; Max E. Bobbitt Jr., a private investor who was also chief executive of Metromedia China; Francesco Galesi, a real estate developer; Stiles A. Kellett Jr., a private investor who led WorldCom's executive compensation committee; Gordon S. Macklin, a former president of NASD; John A. Porter, a private investor who has filed for personal bankruptcy in Florida; and Lawrence C. Tucker, a partner at Brown Brothers Harriman.
The estate of John W. Sidgmore, a former WorldCom executive and director who died in 2003, also agreed to the settlement.
The directors who settled with the New York fund neither admitted nor denied wrongdoing, as is customary. All were WorldCom directors from 1999 to 2002.
Bert C. Roberts, WorldCom's former chairman, did not agree to the deal. He and Arthur Andersen, WorldCom's auditor, are the remaining defendants in the case. Jury selection is to begin March 24...
The amounts being paid will differ for each director. The precise amounts for each director were not disclosed, but the payments will account for roughly 20 percent of the directors' aggregate net worth, not counting their primary residences and retirement accounts.
Insurance companies that provided directors' and officers' liability coverage to the WorldCom board members will also pay $35 million under the settlement." (Ex-Directors at WorldCom Settle Anew, By Gretchen Morgenson, New York Times, March 19, 2005).

Wyeth

2004

$113,400,000 compensatory

$900,000,000 punitive

"Drugmaker Wyeth will appeal a $1 billion judgment against it over a drug used in the so-called fen-phen diet drug combination, after a Texas court denied its motion for a new trial, a securities filing shows. The appeal, which was expected, involves a Beaumont, Texas jury’s award on April 27 of $113.4 million of compensatory damages and $900 million of punitive damages in a wrongful death case brought by the estate of Cynthia Cappel-Coffey. The 41-year-old died after taking the Wyeth drug Pondimin over a three-month period. A judge upheld the verdict on May 17. ... Prior to the award, Wyeth had taken $16.6 billion of charges for past and future payments to the 6 million Americans who took fen-phen, which paired Pondimin or another Wyeth drug, Redux, with phentermine. Those funds were for patients who used fen-phen and developed heart valve problems..." (Diet drugmaker to appeal $1 billion judgment, Reuters, MSNBC, Aug 11, 2004).

Xerox

 

$10,000,000

Xerox was forced to restate earnings to reflect $1.4 billion less in pre-tax profits over the past five years as part of a settlement with the SEC which also included a $10 million penalty. (CNNMoney.com).

Zurich American Insurance

2006

$153,000,000

"The Zurich American Insurance Company said yesterday that it would pay $153 million in restitution and penalties to settle accusations of bid rigging made by officials in New York, Connecticut and Illinois. Under the settlement, $88 million will go to Zurich policyholders, $39 million in penalties will go to New York, and Connecticut and Illinois will each receive $13 million in penalties. The settlement is part of an investigation by Eliot Spitzer, New York's attorney general, into the Marsh & McLennan Companies. Marsh, the nation's largest property and casualty brokerage firm, settled with Mr. Spitzer last year for $850 million over allegations of bid rigging and price fixing as well as hidden commissions. (New York Times, March 27, 2006).

 

 

Endgame