The UC system announced April 6 that it will receive a $13.25 million settlement from Citigroup and its former Salomon Smith Barney subsidiary (now known as Citigroup Global Markets) in a lawsuit arising from the WorldCom Inc. securities fraud. By pursuing a separate action, the university was able to achieve a better result than what it would have received had it participated as a class member in the WorldCom federal class action.

UC filed a complaint on Feb. 13, 2003, under California securities fraud law in San Francisco Superior Court against Salomon Smith Barney, Citigroup Inc. and Arthur Andersen LLP, accusing them of being involved in the staggering financial collapse of WorldCom. UC's complaint alleged that WorldCom, with the complicity of the defendants, engaged in a massive accounting fraud that inflated the price of its stock, damaging shareholders such as the university.

In the wake of the collapse of WorldCom's stock price, several class-action complaints were filed and subsequently consolidated in federal District Court in New York. UC chose to bring a separate suit under California law rather than participate in the federal class action, which was resolved last month, because it had California state law claims that were not pursued by the class plaintiffs.

"In this case, the University of California determined that it would likely obtain a more favorable result by filing a separate suit in California state court, asserting claims under California law," said James Holst, the university's general counsel. "The merits of that strategy were borne out by the result we were able to achieve, which obtained recovery for losses that were outside those included in the class action."

UC's losses resulted from its purchase of 10.2 million shares of WorldCom and related securities acquired between 1998 and early 2000. Because the vast majority of these purchases occurred prior to the period of documented fraud at the company, most of the university's losses did not fit within the claims asserted in the class action.

— from the UC Office of the President