UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK : IN RE WORLDCOM, INC. SECURITIES. MASTER FILE 02 Civ (DLC) : LITIGATION

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1 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK X : IN RE WORLDCOM, INC. SECURITIES : LITIGATION : : This Document Relates to: : : ALL ACTIONS : : X MASTER FILE 02 Civ (DLC) OPINION AND ORDER Appearances: For Lead Plaintiff in the Securities Litigation: Max W. Berger John P. Coffey Steven B. Singer Chad Johnson Beata Gocyk-Farber John C. Browne Jennifer L. Edlind Bernstein Litowitz Berger & Grossman LLP 1285 Avenue of the Americas New York, New York Leonard Barrack Gerald J. Rodos Jeffrey W. Golan Mark R. Rosen Jeffrey A. Barrack Pearlette V. Toussant Barrack, Rodos & Bacine 3300 Two Commerce Square 2001 Market Street Philadelphia, Pennsylvania For Defendant Bernard J. Ebbers: David Wertheimer Lyndon Tretter Hogan & Hartson 875 Third Ave. New York, NY Of Counsel for Defendant Bernard J. Ebbers: R. David Kaufman M. Patrick McDowell Brunini Grantham Grower & Hewes PLLC 1400 Trustmark Building 248 East Capital St. Jackson, MS 39201

2 For Director Defendants: Paul Curnin David Elbaum Simpson Thacher & Bartlett LLP 425 Lexington Ave. New York, NY For Defendant Bert C. Roberts: George E. Ridge Cooper, Ridge & Lantinberg, P.A. 200 West Forsyth Street Suit 1200 Jacksonville, FL For Defendant Arthur Anderson LLP: Eliot Lauer Michael Moscato Michael Hanin Curtis, Mallet-Prevost, Colt & Mosle LLP 101 Park Avenue New York, NY For the Underwriter Defendants: Jay B. Kasner Susan L. Saltzstein Steven J. Kolleeny Skadden Arps Slate Meagher & Flom LLP Four Times Square New York, NY For Defendants Citigroup Global Markets, Inc. f/k/a Salomon Smith Barney, Inc., Citigroup Inc., and Jack Grubman: Martin London Richard A. Rosen Brad S. Karp Eric S. Goldstein Walter Rieman Marc Falcone Joyce S. Huang Paul Weiss Rifkind Wharton & Garrison LLP 1285 Avenue of the Americas Robert McCaw Peter K. Vigeland Wilmer Cutler & Pickering 399 Park Ave. New York, NY For the Government: David N. Kelley United States Attorney William F. Johnson

3 Meredith E. Kotler Assistant United States Attorneys United States Attorney's Office for the Southern District of New York One Saint Andrew's Plaza New York, New York DENISE COTE, District Judge: This Opinion addresses two applications relating to the schedule for discovery in this complex, multi-district securities litigation. The United States Attorney s Office for the Southern District of New York (the Government ) has requested that the Court embargo certain criminal trial witnesses from civil discovery until after the resolution of the pending criminal charges against Bernard J. Ebbers ( Ebbers ), the former Chief Executive officer of WorldCom, Inc. ( WorldCom ). The defendants in the consolidated securities litigation arising from the collapse of WorldCom ( Securities Litigation ) have moved to adjourn the long-established fact discovery cut-off date of June 18, 2004, and to adjourn the class action trial scheduled for January 10, 2005, based on the Government s request. 1 For the following reasons, the defendants motion to extend fact discovery is denied, except that it may reserve some of its allotted time for deposition discovery for the interval between Ebbers criminal trial and the class action securities trial, 1 At a conference on March 24, 2004, the defendants application was denied to the extent it was based on grounds apart from the embargo. The defendants making this application include former WorldCom directors, underwriters, its auditor Arthur Andersen, and its chief outside analyst Jack Grubman and his former employers. 3

4 which will begin on January 10, The Government s request for an embargo is granted to the extent described below. Background The nature of the claims in the Securities Litigation and the course of the litigation have been the subject of many prior Opinions. 2 Only those events necessary to place these applications in context are described here. On June 25, 2002, WorldCom announced a massive restatement of its financial statements. Government investigations and criminal indictments quickly followed. On July 21, WorldCom declared bankruptcy. The first class action lawsuit arising from WorldCom s alleged massive manipulation of its financial reports was filed in this district on April 30, approximately two months before the dramatic June 25 announcement. Many more followed. The class actions were consolidated on August 15, 2002, and Lead Plaintiff New York State Common Retirement Fund filed a Consolidated Class Action Complaint on October 11. Scores of actions alleging individual as opposed to class claims ( Individual Actions ) were also filed in venues across the country. Individual Actions and class actions pending in 2 See, e.g., In re WorldCom, Inc. Sec. Litig., 294 F. Supp. 2d 392 (S.D.N.Y. 2003)(deciding motions to dismiss the consolidated class action complaint); In re WorldCom, Inc. Sec. Litig., 219 F.R.D. 267 (S.D.N.Y. 2003) (certifying the consolidated class action); In re WorldCom, Inc. Sec. Litig., 294 F. Supp. 2d 431 (S.D.N.Y. 2003)(deciding a motion to dismiss claims in an individual action which had been consolidated for pre-trial purposes with the Securities Litigation). 4

5 other federal courts were transferred here by the Judicial Panel on Multi-District Litigation ( MDL Panel ), and consolidated with the WorldCom class actions for pre-trial purposes through an Order of December 23, See In re WorldCom, Inc. Sec. Litig., 02 Civ (DLC), 2002 WL (S.D.N.Y. Dec. 23, 2002). That consolidated litigation, which includes well over 100 actions, is referred to as the Securities Litigation. On May 19, 2003, the motions to dismiss made by most of the defendants named in the Consolidated Class Action Complaint were largely denied. In re WorldCom, Inc. Sec. Litig., 294 F. Supp. 2d at 431. With that decision, the discovery stay imposed pursuant to the Private Securities Litigation Reform Act of 1995 ( PSLRA ) was lifted, and Lead Plaintiff began its discovery efforts in earnest. Months earlier, the Lead Plaintiff had obtained an order to partially lift the PSLRA stay, and received copies of documents that WorldCom had already produced in connection with various governmental and other investigations of the company. See In re WorldCom, Inc. Sec. Litig., 02 Civ (DLC), 2003 WL , at *2 (S.D.N.Y. Dec. 16, 2003); In re WorldCom, Inc. Sec. Litig., 234 F. Supp. 2d 301 (S.D.N.Y. 2002). The defendants were required to substantially complete their extensive document production by October 10. During September and October, the Court and parties discussed the schedule and ground rules for the remainder of the litigation. The plaintiffs and the defendants each gave their estimates of the number of depositions that they would need to conduct. For example, in their letter of October 24, the 5

6 Underwriter Defendants estimated that they would need well over 100 depositions of defendants and non-parties in addition to the depositions of plaintiffs and those who advised the plaintiffs. The putative deponents included the Arthur Andersen and SSB Defendants, 3 and individuals associated with each of them, the Officer and Director defendants, two law firms that served as counsel to WorldCom and its board of directors, two accounting firms that served as auditors for WorldCom and its board, financial institutions that loaned money to WorldCom, rating agencies, non-party research analysts, investment banks and law firms that advised WorldCom s acquisition targets, and individuals associated with WorldCom. A scheduling order of November 14 provided that the plaintiffs and defendants in the Securities Litigation are each limited to sixty eight-hour deposition days, excluding the time given to defendants for discovery of the plaintiffs in the Individual Actions. The parties may divide that time in various ways, including taking four, eight, or sixteen hour depositions of a deponent 4. Substantive depositions of the defendants were scheduled to begin by January 15, 2003, and fact discovery in the Securities Litigation, excluding again the discovery of plaintiffs in the Individual Actions, was scheduled to conclude 3 The SSB Defendants include Citigroup Global Markets, Inc. f/k/a Salomon Smith Barney, Inc., Citigroup Inc., and Jack Grubman. 4 The time taken for cross-examination of any deponent is not deducted from the cross-examining side s total allotment of depositions days unless the time exceeds the time taken for direct examination of the deponent. 6

7 on June 18, The schedule for expert discovery and summary judgment practice in the class action, as modified on January 20, 2004, provides that experts will be identified on May 28, and that expert discovery will conclude on August 27. Summary judgment motions will be filed on July 30, and fully submitted on September 10. The pretrial order in the class action is due on November 12, and trial in the class action is scheduled to begin on January 10, As of the Fall of 2003, four former WorldCom executives and employees had pleaded guilty to criminal charges: David F. Myers, Troy Normand, Buford Yates, Jr. and Betty L. Vinson. WorldCom s former CFO Scott D. Sullivan was under indictment and his trial was scheduled to begin on February 2, In re WorldCom, Inc. Sec. Litig., 2003 WL , at *2. A stay and discovery bar had been in place since December 2002 as to each of these five individuals. In re WorldCom, Inc. Sec. Litig., 02 Civ (DLC), 2002 WL (S.D.N.Y. Dec. 5, 2002) ( December 2002 Order ). At the request of the Government (and with the agreement of all participants in the Securities Litigation except the Underwriter Defendants and the SSB Defendants 5 ), interview notes, memoranda and supporting document binders for twenty-nine individuals who had been interviewed by Wilmer, Cutler & Pickering ( Wilmer ) as counsel to the Special Investigative Committee of the WorldCom Audit Committee, were withheld from 5 The Government s letter of September 4, 2003 described the agreement reached by many of the parties to the Securities Litigation, which it represented had required a substantial amount of time to negotiate. 7

8 immediate production to the parties in the Securities Litigation. 6 These materials were withheld because the Government represented that these twenty-nine individuals (the Twenty-Nine ) were potential Government witnesses at the Sullivan trial or in connection with an ongoing related investigation. It was expected that these materials would be provided to the parties by approximately January To the extent that the parties wished to depose any of the Twenty-Nine, those depositions were to begin on April 16, following the completion of the Sullivan trial. On December 9, the Government notified counsel that the Wilmer material for nine of the Twenty-Nine individuals was available because the Government had determined that it was unlikely to call these witnesses at the Sullivan trial. 8 On December 15, the Government released materials for eighteen of 6 Wilmer interview notes, memoranda, and supporting document binders for 120 individuals, including ninety-three former and current WorldCom directors, officers, and employees, as well as ten to thirteen boxes of material providing general support for the report that Wilmer issued on March 31, 2003, was produced to the parties. See In re WorldCom, Inc. Sec. Litig., 2003 WL , at *2. 7 The Government reserved to right to request that materials for up to ten of the individuals be withheld beyond that date. 8 The nine were identified as Kevin Brumbaugh, Scott Hamilton, Rob Pierson, Daniel Renfroe, Danny Savage, Glyn Smith, Angela Walter, and Chuck Wasserott. 8

9 the remaining twenty-one witnesses. 9 On April 2, 2004, it released the material for the remaining three witnesses. 10 On March 2, Sullivan entered a guilty plea pursuant to an agreement to cooperate with the Government. Ebbers was indicted, and arraigned on March 3, for his role in the WorldCom financial fraud. His criminal trial is scheduled for November 9, The Government represents that the Ebbers trial will last four to six weeks. Meanwhile, on October 29, 2003, the three SSB Defendants moved to stay merits-based deposition discovery. One of their five arguments is related to the current application. They argued that merits-based discovery should halt while the stays as to Sullivan, Myers, Yates, Vinson and Normand were in place. Because they failed to make a particularized showing of need to support that application, it was denied on December 16. In re WorldCom, Inc. Sec. Litig., 2003 WL , at *7. On February 17, 2004, the defendants made this application to extend the fact discovery cut-off date and class action trial date by six months. On March 16, the Government requested that discovery of critical witnesses at the Ebbers trial be stayed until after that trial. Its request included the five 9 The eighteen were identified as Mona Abutaleb, Blair Bingham, Max Bobbitt, Mary Chastka, Cynthia Cooper, Brian Higgins, Stiles Kellett, Ron Lomenzo, Farrell Malone, Susan Mayer, Jon McGuire, Tony Minert, Gene Morse, Troy Normand, Stephanie Scott, Sanjeev Sethi, Jay Slocum, and Mark Willson. Troy Normand was one of the individuals who had already entered a plea of guilty and as to whom a discovery bar existed. Taranto. 10 The three were Bruce Borghardt, Ashwin Damodaran, and Lisa 9

10 individuals for whom a stay had been entered in December 2002, and nineteen of the Twenty-Nine. 11 The Government noted that the parties in the Securities Litigation had interview memoranda and other documents for virtually all of the Twenty-Nine. At a conference on March 24, the motion to extend fact discovery and to adjourn the trial date was denied. The Court found that, with the potential exception of the issue of embargoed witnesses, the defendants had not shown a particularized need for the extension, or made a sufficient showing of prejudice to justify an extension. It observed that the defendants had been slow to begin taking document discovery and had not noticed more than one or two depositions as of March While this approach to discovery was understandable, given the fact that the defendants already had access to an enormous amount of information and discovery materials and had within their own institutions the resources they needed to establish a due diligence defense, it also meant that the defendants had not shown a need for access to the embargoed witnesses. The Court observed that the issue of the embargoed witnesses would be ripe for resolution when the defendants made their decisions on how to spend their sixty days of deposition time, and that it would give the Government an opportunity to be heard at that time. 11 The Government indicated that there may be a few additional persons as to whom it would seek a stay of discovery. 12 As of March 24, the defendants had given notice of an intent to depose a representative of Fitch Ratings, and perhaps one other witness. 10

11 Depending on the showing made by all concerned, it opined that it might allow the defendants to save some portion of their sixty deposition days for use after the Ebbers trial. Five days later, on March 29, the defendants noticed the depositions of twenty-two individuals 13 and six institutions. 14 The defendants apparently chose to depose principally individuals as to whom they expected the Government to object. Of the twenty-two individuals, nine were among the Twenty-Nine, five were covered by the stay and bar orders entered in December 2002, one (Ebbers) had recently been indicted and had made a motion for a stay, 15 and two are cooperating with the Government pursuant to non-prosecution agreements. 16 This leaves five individuals: Kimber McDowell, Deborah Blackwell, Mark Filut, and two representatives of one of the named plaintiffs in the class action The defendants seek to depose Cynthia Cooper, Betty Vinson, Glyn Smith, Troy Normand, Kimber McDowell, Gene Morse, Buford Yates, Jr. Deborah Balckwell, Jay Slocum, David Myers, Sanjeev Sethi, Marc Filut, Stephanie Scott, Mark Abide, Michael Pendergast, Lisa Taranto, Chuck Wasserrot, Patricia Barnebeo, Scott Sullivan, Bernard Ebbers, Farrell Malone, and Robert Pierson. 14 The defendants had already noticed the deposition of a Fitch Ratings representative. They added Badford & Marzac, Vanderbilt Capital Advisors, Standard & Poor s, Moody s, Nextel, and Sprint. April Ebbers motion for a stay is due to be fully submitted on 16 These two are Sanjeev Sethi and Mark Abide. 17 Particia Barnebeo and Michael Pendergast are employees of named plaintiff HGK Asset Management. 11

12 The Government initially informed the defendants that it did not object to depositions proceeding as to seven of the twentytwo witnesses, a number it later increased to nine. As of April 7, the Government requested that discovery of thirteen of the twenty-two individuals be stayed until after the Ebbers trial. The thirteen include the five as to whom discovery is stayed under the December 2002 Order, the two individuals with nonprosecution cooperation agreements, and six others. 18 The parties have detailed Wilmer interview memoranda for seven of the thirteen individuals. 19 The Government represented at oral argument on April 8, that it would not object to these thirteen individuals being deposed immediately after the jury returns a verdict in the Ebbers trial, or immediately after Ebbers enters a plea of guilty, should he choose to resolve the criminal charges against him in that manner. It also represented that it was not seeking to embargo all of the witnesses that it planned to call to testify at the Ebbers trial, but only those it deemed the most critical to its case. Discussion The Government has requested a temporary embargo of discovery of thirteen witnesses who will testify in the criminal 18 The six are Lisa Taranto, Robert Pierson, Kimber McDowell, Cynthia Cooper, Eugene Morse, and Farrell Malone. Of these six, only McDowell was not among the Twenty-Nine. 19 They do not have such memoranda for four of the five who entered pleas of guilty, Kimber McDowell and Mark Abide. 12

13 trial against Ebbers. The defendants have requested a modification of the scheduling order in the Securities Litigation in light of the Government s request and their desire to depose these thirteen witnesses. Prior Opinions issued in the Securities Litigation have described the standards that apply to these requests, and they are incorporated here. In brief, the Government s request for an embargo is in the nature of a request for a partial stay, and requires consideration of the extent to which the issues in its prosecution and this civil litigation overlap, the status of the two cases, the interests of the plaintiffs and defendants in the Securities Litigation, the interests of the judicial system, and the public interest. See In re WorldCom, Inc. Sec. Litig., 02 Civ (DLC), 2002 WL , at *4 (S.D.N.Y. Dec. 5, 2002)(collecting cases). A scheduling order may be modified upon a showing of good cause and diligence. 20 In re WorldCom, Inc. Sec. Litig., 02 Civ (DLC), 2003 WL , at *2 (S.D.N.Y. Dec. 1, 2003)(collecting cases). The Government has shown a need to embargo from civil discovery at least seven of the thirteen witnesses for which it seeks such protection until the conclusion of the Ebbers trial or his plea of guilty. Each of these witnesses has executed a cooperation agreement with the Government; five have entered 20 The defendants complain that they have been required to make a particularized showing of a need to take a particular person s deposition. They are wrong. They have been required to make a particularized showing of a need to extend the discovery schedule in light of the Government s request for an embargo. 13

14 pleas of guilty. The execution of such agreements is concrete and compelling evidence of the significance of these seven witnesses to the Government s criminal investigation. Should Ebbers proceed to trial, civil depositions of these witnesses will materially increase the burden on the Government of preparing its witnesses for trial and may needlessly complicate the criminal trial and the jury s task. Whether intentionally or not, these depositions may also be used to circumvent the more restrictive discovery rules that apply to criminal cases. The parties to the Securities Litigation correctly observe that much of what these witnesses did and in some cases, what they said, is already known, and that depositions are unlikely to trench upon any novel issue not already spread upon the public record. Questioning on well trodden ground may nonetheless muddy the issues not because it creates any meaningful discrepancy, but because every additional description of an event is inevitably accompanied by some variation. Counsel invariably mine each iteration to point out real and imagined inconsistencies. Therefore, civil depositions of critical witnesses in a criminal trial place a significant burden on the prosecution, and may at the extreme, undermine its ability to obtain a just verdict. The other interests that should be weighed in evaluating the Government s request, however, suggest that every effort should be made to accommodate not just the Government s request but also the needs of the parties in the Securities Litigation. At the heart of both the criminal investigation and this civil litigation is the accounting fraud at WorldCom and the 14

15 misrepresentation of the company s finances to the investing public. Both of these undertakings are nearing their climax, with the class action trial in the Securities Litigation scheduled to begin shortly after the completion of the criminal trial of the last indicted defendant. As will be discussed in greater detail below, the parties to the Securities Litigation may have a need to depose at least some of these witnesses in advance of the civil trial. They also have an interest in bringing this massive and expensive civil litigation to an end as expeditiously as possible. The plaintiffs have a strong desire to pursue recovery; the defendants have a real need for finality. Federal courts have an interest in the efficient and speedy resolution of not just criminal but also civil litigation, including complex civil litigation. A concentration of related litigation within one district may facilitate the creative exercise of discretion and coordinated management of litigation to balance the interests of all of the litigants while working towards the prompt resolution of each of the cases. 21 Finally, the public has a compelling interest in the effective enforcement of this nation's criminal laws and, given the magnitude and impact of the WorldCom fraud, an equally strong interest in the 21 In addition to the Securities Litigation, the ERISA litigation arising from WorldCom s collapse has also been transferred to this Court by the MDL Panel. Discovery in those complimentary litigations has been coordinated. The SEC s lawsuit against WorldCom, each of the criminal prosecutions against WorldCom employees, and the WorldCom bankruptcy are also filed in this district. As a consequence, each of the judicial officers supervising those matters and counsel working on those cases are readily able to cooperate and communicate when it is appropriate to do so. 15

16 resolution of the Securities Litigation on as early a schedule as is feasible. Turning to the defendants request for an extension of six months in the schedule for the Securities Litigation, they have shown neither the diligence nor the good cause to warrant such an extension. First, the defendants essentially began to notice depositions with just three months remaining in the fact discovery period, and only after this Court observed that their application for an extension based on the Government s request for an embargo of certain witnesses was not ripe. And even then, with few exceptions, the defendants noticed principally those depositions that were likely to create a conflict with the Government. The defendants may well decide that they do not need to take anything close to their allotment of sixty days of deposition testimony. That decision, if it is made, would be entirely reasonable since the plaintiffs have been taking many depositions of significance to this case, an extraordinary amount of documentary evidence has long been available to counsel, there have been detailed and comprehensive public reports about the WorldCom fraud prepared by independent investigators, and the defendants themselves are the most obvious and best witnesses to present their own defenses. Second, the defendants have not shown that an extension of the fact discovery period generally is necessary because of the Government s request to embargo thirteen witnesses for a period of time. The defendants have made no showing that they need to 16

17 take discovery of these witnesses to actually discover what occurred at WorldCom. The nature, extent, and means of the WorldCom fraud are well documented and described. They have made no developed argument that the depositions of these thirteen witnesses are necessary for preparation of expert reports or in connection with any summary judgment motion practice. 22 What is at stake, therefore, is whether the deposition testimony of these witnesses, and particularly of any of these witnesses who may be beyond the subpoena power of this Court, will be important for trial. The defendants have identified three areas in which testimony of the thirteen witnesses is important to them. The SSB and Underwriter Defendants spoke to Sullivan and Myers; Arthur Andersen spoke to others in addition to these two men. 23 The defendants each wish to prove that they relied on what they were told, and that they were entitled to rely on it. Although they have not explained precisely why the existence of those 22 For instance, the defendants could invoke Rule 56(f), Fed. R. Civ. P., and demonstrate that the testimony of an embargoed witness is necessary to defend against a summary judgment motion. They have not shown, however, that the testimony of any of the thirteen witnesses is likely to be necessary to create an issue of fact that would defeat a summary judgment brought by the plaintiffs. Similarly, they have not shown that the depositions of embargoed witnesses are necessary to learn how the fraud was carried out and concealed so that their experts can opine that even a diligent director, auditor or underwriter would have remained ignorant of it. 23 As WorldCom s auditors, Andersen had direct contact with many WorldCom employees. Andersen has not identified to which of the thirteen witnesses it spoke regarding issues of importance in this case, but it will be assumed that it could make such a showing with respect to several if not most of the thirteen witnesses. 17

18 conversations makes it necessary to depose these witnesses, the reason is not difficult to divine. To the extent that the depositions confirm what the defendants remember these witnesses saying, then the witnesses testimony will be important corroboration for the defendants and their reliance arguments. The defendants also argue that the depositions are important to show the steps WorldCom and its employees took to conceal the fraud from the defendants. This evidence is available from many sources, and not only from the embargoed witnesses. Nonetheless, to the extent possible, the defendants are entitled to choose whom they believe will be the best witnesses to demonstrate the concealment efforts to the jury. Finally, the defendants contend that these witnesses are important because some of them will be attempting at trial to shift responsibility to pay damages to each other and to other wrongdoers. For example, an outside director is liable under Section 11 of the Securities Act of 1933 only for her proportional share of the damages unless it is determined that she knowingly violated the Securities Act. See In re WorldCom, Inc. Sec. Litig., 02 Civ (DLC), 2004 WL 77879, at *11 (S.D.N.Y. Jan. 20, 2004). Similarly, the SSB Defendants only have proportional liability on the claims brought against them under Section 10(b) the Securities Exchange Act of 1934 unless it is determined that they knowingly violated the statute. See 15 U.S.C. 78u-4(f). Again, there has been no showing that the depositions of these thirteen witnesses are essential in order successfully to 18

19 shift blame away from the civil defendants who can invoke the proportionate liability provisions of the law. These defendants have many targets onto which to shift blame, but up until this point they have not used deposition discovery to help them to do so. For instance, neither the Director Defendants nor the SSB Defendants have given notice of an intent to take the depositions of WorldCom s auditor, their co-defendant Andersen. Nonetheless, the defendants are entitled to the extent it is feasible to use whomever they consider to be the most effective witnesses to shift blame and to reduce their responsibility to pay damages. Of course, the evidence developed at Ebbers trial, and Ebbers own conviction, if he is convicted, may be of enormous assistance to the defendants in this regard. On balance, therefore, the defendants have shown that deposition testimony from at least some of the thirteen embargoed witnesses may be important to them at trial. They have not shown, however, that it is necessary for them to depose these witnesses before the conclusion of fact discovery on June 18. There are many important reasons, as described above, to adhere to the schedule in this civil litigation and to begin the class action trial next January. For its part, the Government has shown that it is important to embargo at least seven of the thirteen witnesses for which it has requested such treatment. To balance these competing needs, the Court will allow the defendants to reserve some of their deposition time to take the depositions of embargoed witnesses after the Ebbers trial and 19

20 before the class action trial. 24 It is premature to decide precisely either how many witnesses will be embargoed and how much time can be reserved. The defendants are in the process of deciding what witnesses they will depose. When they have completed those decisions, and if those putative deponents include more witnesses for whom the Government will seek an embargo, then the Court will be able to make a judgment regarding these issues. Until the full magnitude of the conflict is known, any ruling could only be provisional. It is important to observe that the degree to which there is a conflict here may be ameliorated by future events. Should Ebbers enter a plea of guily, the Government has agreed that its embargoed witnesses may be deposed immediately. Similarly, should a class of defendants decide to settle this litigation, the need for any testimony from certain embargoed witnesses may disappear. Finally, the testimony that embargoed witnesses will give at a criminal trial will in all likelihood be more extensive and detailed than any deposition that could occur today. As a result, any deposition taken after the criminal trial can be significantly shorter than one taken now Should the date of the criminal trial shift, it will be necessary to revisit these issues and consider all of the options available at that time, in light of the circumstances that exist then. 25 In a similar vein, and as the parties have observed, the detailed witness interviews that exist for many WorldCom employees have already permitted the parties to take shorter, more focused depositions. 20

21 Conclusion The defendants' motion to extend the June 18, 2004 fact discovery cut-off in the Securities Litigation is denied. The Government's request to embargo seven witnesses from discovery in the Securities Litigation is granted. Decision is reserved on the Government's request to embargo an additional six witnesses from discovery. SO ORDERED: Dated: New York, New York April 15, 2004 DENISE COTE United States District Judge 21