Wed Aug 25, 2004

PHILADELPHIA (Reuters) - Former directors of WorldCom Inc. have agreed to settle investors' claims that they failed to properly control the telephone company's finances, the lead plaintiff in the class action case said on Wednesday.

The former directors of WorldCom, which is known as MCI Inc. (MCIP.O: Quote, Profile, Research) , have agreed to pay $50 million to settle the charges, according to the Wall Street Journal, which also reported that the settlement is expected to be announced later this week.

The former directors, as well as former executives, 18 banks, and former outside auditor Arthur Andersen, faced charges stemming from the massive accounting scandal that pulled the No. 2 U.S. long-distance company into bankruptcy.

A spokesman for the New York State comptroller, the lead plaintiff in the case declined to comment on the reported amount of the settlement.

The agreement excludes former WorldCom directors Bert Roberts and Francesco Galesi, the newspaper said. It was unclear whether the settlement would include the estate of former director and Chief Executive John Sidgmore, who died in December 2003.

MCI, which emerged from the world's largest bankruptcy in April, could not be immediately reached for comment.

In May, Citigroup Inc. (C.N: Quote, Profile, Research) agreed to pay $2.65 billion to investors to settle claims it promoted WorldCom's stock and bonds as good investments despite the bank's concerns about the rocky financial conditions at the telephone company.

Seventeen other former WorldCom bond underwriters, however, plan to use a different strategy instead of settling, according to the Wall Street Journal.

Until the banks can determine exactly which financial statements were false, and how there were misstated, the defendants currently deny that the books are incorrect, the newspaper reported.

The newspaper cited a court transcript of a teleconference hearing last week with U.S. District Judge Denise Cote.

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