WorldCom scandal lawyers net £145m

LAWYERS who have secured the multi-billion dollar payout from Citigroup for investors in scandal-struck telecoms company WorldCom are on course to bag at least $258m (£145m) in fees.

The payout would inscribe the two firms into the annals of legal expenses history as they are the same ones that earned $262m in fees from the $3.2bn payout for shareholders in car rentals group Cendant, the biggest-ever class action settlement.

Max Berger and John Coffey from New York's Bernstein Litowitz Berger & Grossman joined forces with Leonard Barrack and Gerald Rodos of Philadelphia's Barrack, Rodos & Bacine to help WorldCom stock and bondholders wrest $2.65bn from Citigroup over alleged fraudulent banking support it gave to WorldCom.

The firms' initial charging structure, seen by the Evening Standard, allows for the lawyers to charge a sliding fee starting at 12% of recoveries up to $100m and then add in gradually diminishing percentages of the next four tiers, ending up with 4% for the tranches over $1bn.

This would total some $145m in fees. Expenses could add a few million more to the total, still to be approved by the New York courts.

By comparison, the law firms' main client and the lead plaintiff in the case, the New York State Common Retirement Fund, lost about $300m from WorldCom investments.

A source close to the proceedings said: 'They are getting a great bang for their buck - the lawyers have worked at break-neck speed.'

The woes of WorldCom, whose former chief executive Bernie Ebbers is still awaiting trial, have already racked up approaching $1bn in fees for lawyers, accountants and consultants since its collapse 18 months ago into Chapter 11 bankruptcy protection and its re-emergence last month as MCI.

Meanwhile, MCI announced a first-quarter loss of $388m and a further 7,500 job cuts as it struggles with declining revenues in all its main businesses.

Revenues fell 12.9% to $6.3bn as it continued to lose business to the so-called Baby Bell local phone companies that have been allowed into the long-distance market.