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IN RE WORLDCOM

November 21, 2002

IN RE WORLDCOM, INC. SECURITIES LITIGATION THIS DOCUMENT RELATES TO: ALL ACTIONS


The opinion of the court was delivered by: Denise Cote, United States District Judge

OPINION AND ORDER

Lead plaintiff New York State Common Retirement Fund ("NYSCRF") moves for an Order modifying the discovery stay imposed pursuant to Section 21D(b)(3)(B) of the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995 ("PSLRA"), 15 U.S.C. § 78u-4(b)(3)(B), to permit it to obtain copies of certain documents and materials which related non-party WorldCom, Inc. ("WorldCom") has already produced to other entities. Specifically, NYSCRF seeks copies of certain documents and materials which WorldCom has produced to any committee of the legislative branch of the U.S. government or to any entity of the executive branch, including the Department of Justice and the Securities and Exchange Commission ("SEC"). NYSCRF also requests that copies of certain documents and materials which WorldCom has produced to Wilmer, Cutler & Pickering ("Wilmer") in connection with Wilmer's representation of the Special Investigative Committee of WorldCom's board of directors be made available to NYSCRF after Wilmer has delivered its final report to WorldCom's board. The WorldCom Director Defendants*fn1 submitted an opposition on November 18, which certain Underwriter Defendants*fn2 joined. Defendant Arthur Andersen LLP ("Andersen") also submitted an opposition on that date. NYSCRF submitted its reply on November 20. The U.S. Attorney for the Southern District of New York ("U.S. Attorney"), which is conducting a criminal investigation of WorldCom's accounting and business practices, has submitted a letter to be considered in connection with this motion. It does not oppose the production of documents that is sought through this application. For the reasons stated, NYSCRF's motion is granted.

Background

This class action arises out of the recent collapse of what was, in 1998, the second largest telecommunications company in the world.*fn3 On June 25, 2002, WorldCom announced that it would have to restate its publicly-reported financial results for 2001 and the first quarter of 2002 because it had, among other things, improperly treated more than $3.8 billion in ordinary costs as capital expenditures, in violation of generally accepted accounting principles. Since that date, WorldCom has made further announcements and disclosures suggesting that all of its financial results since at least as early as 1999 require restatement. On July 21, WorldCom filed for bankruptcy in the Bankruptcy Court of this district.

Government Investigations of WorldCom

On June 26, 2002, the SEC filed a civil complaint against WorldCom. On June 27, the U.S. House of Representatives ("House") Committee on Energy and Commerce and the House Committee on Financial Services each launched an investigation.
On July 31, the U.S. Attorney filed a criminal complaint against defendant Scott D. Sullivan ("Sullivan"), the former Chief Financial Officer and a former Director of WorldCom, and defendant David F. Myers ("Myers"), the former Controller and a former Senior Vice President of WorldCom, charging each of them with conspiracy to commit securities fraud, securities fraud, and five false filings with the SEC. On August 28, Sullivan and defendant Buford Yates, Jr. ("Yates") were indicted on the same seven felonies. On September 26, Myers pleaded guilty to a three-count criminal information charging him with conspiracy, securities fraud, and filing false documents with the SEC. On October 7, Yates also pleaded guilty to conspiracy and securities fraud. On October 10, two members of WorldCom's accounting department, Betty Vinson and Troy Normand, pleaded guilty to conspiracy and securities fraud.
On November 14, the Honorable Jed S. Rakoff approved a settlement between the SEC and Myers and Yates granting the SEC certain injunctive relief, but deferring until a later date any judgment with respect to the amount in fines, if any, that Myers and Yates will pay. At a hearing on November 13, Judge Rakoff stated, with respect to the SEC's action against WorldCom, that because the parties were engaged in discussions looking to resolve important portions of the action, he would briefly delay the case management plan to facilitate the discussions.
Procedural History of In re WorldCom, Inc. Securities Litigation and In re WorldCom, Inc. ERISA Litigation
The first securities class action filed against defendants in connection with the above-referenced events was filed in this district on April 30, 2002, under the caption Albert Fadem Trust and Bruce A. Fadem v. Worldcom, Inc., et al. Thereafter, approximately twenty related class actions were filed. On August 12, a conference was held to consolidate Albert Fadem and its related cases (collectively, the "Albert Fadem Cases") pursuant to Fed.R.Civ.P. 42(a) and to appoint lead counsel pursuant to Section 78u-4(a)(3)(B)(i) of the PSLRA, 15 U.S.C. § 78u-4(a)(3)(B)(i). By Order dated August 15, 2002, the Albert Fadem Cases were consolidated under the caption In re WorldCom, Inc. Securities Litigation, NYSCRF was appointed lead plaintiff, and NYSCRF was ordered to file a consolidated amended complaint no later than October 11, 2002.

By Order dated September 18, the Court consolidated Gail M. Grenier v. WorldCom, Inc., et al., 02 Civ. 4816 (DLC), and John T. Alexander v. WorldCom, Inc. et al., 02 Civ. 5140 (DLC), both of which allege breaches of fiduciary duty under the Employment Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001, et seq., by WorldCom and certain WorldCom fiduciaries in connection with the WorldCom 401(k) Salary Savings Plan (the "Plan"), under the caption In re WorldCom, Inc. ERISA Litigation.

By letter dated September 30, NYSCRF requested a sixty-day extension of time in which to file the amended complaint in In re WorldCom, Inc. Securities Litigation. By letters dated October 2, the WorldCom Director Defendants, the Underwriter Defendants, and Andersen objected to any extension of time greater than ten days, noting that if NYSCRF's request were granted, it "will have had more than seven months from the date of the first complaints to file an amendment." By Order dated October 3, NYSCRF's request for an extension of time was denied and, in accordance with numerous stipulations to which the parties had agreed in the individual cases prior to consolidation, defendants were ordered to answer or move with respect to the complaint no later than December 13, 2002.
By Order dated October 8, pursuant to 28 U.S.C. § 1407, the Judicial Panel on Multidistrict Litigation ordered the centralization of approximately forty WorldCom-related class action cases in this Court, which included both securities and ERISA class actions. On October 11, NYSCRF filed its consolidated amended complaint.

By Order dated November 18, Stephen Vivien ("Vivien"), Gail M. Grenier, and John T. Alexander were appointed lead plaintiffs in In re WorldCom, Inc. ERISA Litigation and Keller Rohrback, L.L.P. ("Keller Rohrback") was appointed lead counsel. Vivien had filed suit in the Northern District of California on March 18, 2002, and one of the causes of action in that lawsuit has already survived a motion to dismiss. In an Order dated July 26, 2002, Vivien v. WorldCom, Inc., No. 02-01329 WHA (N.D.Cal. July 26, 2002), the Honorable William Alsup denied in part defendants' motion to dismiss for lack of personal jurisdiction and failure to state a claim. Judge Alsup held that the plaintiffs' complaint adequately alleged that defendants Ebbers and Sullivan acted in a fiduciary capacity with respect to WorldCom's ERISA Plan and that they breached ...


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