Court finds in favor of JDSU execs
MILPITAS, CA—A jury has ruled in favor of JDSU on all claims in a securities class-action lawsuit filed by Connecticut Retirement Plans and Trust Funds against the company in the United States District Court for the Northern District of California (Oakland, CA).
MILPITAS, CA—A jury has ruled in favor of JDSU on all claims in a securities class-action lawsuit filed by Connecticut Retirement Plans and Trust Funds against the company in the United States District Court for the Northern District of California (Oakland, CA). The class-action lawsuit, which was originally filed in 2002, claimed that company executives misrepresented the financial health of the company to shareholders, resulting in the loss of millions of dollars. In particular, four of former JDSU officials—Kevin Kalkhoven, Jozef Straus, Anthony Muller, and Charles Abbe—were accused of securities fraud and insider trading.
JDSU started out as a scientific-laser company but became one of the leading benefactors of the optical telecom boom that began in the late 1990s. Over a 20-month period starting in 1999, the company became a Wall Street “darling”, watching its stock soar to record heights ($125/share in August 2000) and buying 11 companies as a result. But when the bottom fell out of the telecom market in early 2001, the company began reporting huge financial losses ($50.6 billion in FY2001) and soon thereafter laid off more than 80% of its workforce and closed 29 facilities.
One of hardest hit of the company’s shareholders during this same time was the state of Connecticut’s public-pension funds, which lost $65 million as a result of investing in JDSU stock. Connecticut state treasurer Denise Nappier filed the shareholder lawsuit, which alleged that JDSU executives hid the fact that demand was falling for its products throughout 2000. The lawsuit, which sought more than $20 million in alleged damages, noted that Kalkhoven, Straus, Muller, and Abbe divested more than $350 million in JDSU stock between July 31 and August 31, 2000. Other “insider” shareholders sold another $503 million in that same time period.
“They knew in the year 2000 what was to come in the year 2001,” said plaintiff’s attorney Barbara Hart in court, according to news reports. “Instead of telling the public, they cashed out, selling hundreds of millions of dollars of stock, benefiting themselves.”
The jury returned its verdict after deliberating just over two days, following a trial that lasted almost four weeks. JDSU executives noted that while the jury’s decision in this case is a significant positive milestone, it continues to defend itself in the securities class action and related litigation.
“We are extremely gratified by the jury’s verdict, as we have always believed that the plaintiffs’ claims were without merit,” said Kevin Kennedy, JDSU president and CEO. “We will continue focusing our full attention on developing innovative products and delivering on the significant potential of our business model to create shareholder value.”