US- Three California public pension funds have begun legal proceedings in an attempt to recover losses against WorldCom executives and underwriters of WorldCom bonds issued in May of last year.

Calpers, the $150bn fund for public employees, Calstrs, the $100bn teachers’ scheme and LACERA, the $26bn fund for Los Angeles county employees, are attempting to recoup losses of $318.5m.

The suit, filed in Los Angeles by the San Diego law firm Milberg, Weiss, Bershad, Hynes & Lerach, lists the nine underwriters and fifteen WorldCom executives including former chief executive Bernie Ebbers and ex-chief financial officer Scott Sullivan.

James Burton, chief executive of Calpers, said the suit charges that WorldCom clearly knew its books falsely portrayed its true financial state. Calpers, which is seeking to recoup $268m, also claims the banks sold the bonds in order to prevent their credit lines being drawn down.

“These banks underwrote the bonds so that WorldCom could use the monies raised to avoid having to rely on these same banks’ outstanding credit lines,” said Burton.

The banks listed in the suit include Citigroup, Salomon Smith Barney, JP Morgan Securities, JP Morgan Chase, Banc America, Bank of America Securities, ABN Amro, Deutsche Bank and Deutsche Bank Alex Brown.

Calstrs chief executive Jack Ehnes said the lawsuit was designed not only to hold WorldCom responsible but also to send a message out to the banking industry. “We want the investment banking community to know we will not stand for this breach of ethical conduct.

“If we can’t rely on the independence of the underwriters’ due diligence, how can we purchase bonds of any type in the future?” he said.

WorldCom raised $11.9bn last May in what was a record bond issue for a US company. Institutions and pension funds that took advantage of the issue have taken a massive hit as the bonds are now trading at about 15 cents in the dollar and are as good as worthless.

Calstrs hopes to recoup $24.5m and LACERA $26m.