Investor lawsuit against Sprint gains class action status
04/01/2014 5:26 PM
04/01/2014 5:26 PM
An investor lawsuit brought against Sprint Corp. five years ago has won court approval as a class action case.
Several individual and institutional investors had sued in U.S. District Court in Kansas City, Kan., in 2009 citing problems dating back to Sprint’s 2005 merger with Nextel.
In a ruling last week, U.S. District Judge Eric F. Melgren held that investors who owned Sprint shares and bonds during the period in question share enough common elements to be treated as a group. They don’t have to sue separately.
“We are disappointed with the court’s decision,” Sprint spokeswoman Stephanie Vinge Walsh said in an email. “However, this is not a ruling on the merits of the underlying case but simply that the case can proceed as a class action.”
The lawsuit names as defendants Sprint Nextel Corp., its former chief executive officer Gary D. Forsee, its former chief financial officer Paul N. Saleh who served as interim CEO after Forsee’s departure, and its former controller William G. Arendt who served as acting chief financial officer.
Investors complained that between Oct. 26, 2006, and Feb. 27, 2008, the company and top officials falsely claimed the merger between Sprint and Nextel was generating significant benefits. They cited press releases, conference calls with analysts and investors as well as company filings with the Securities and Exchange Commission.
Sprint was claiming billions of dollars in savings from the merger, a better mix of customers from changes in credit standards, and progress in combining the companies’ wireless networks, the investors said.
“Plaintiffs claim that Sprint’s true condition was not revealed until after Dan Hesse was named CEO of Sprint on December 8, 2007. This was two months after Sprint’s board of directors forced defendant Forsee to resign as the company’s CEO and chairman,” Melgren said in a 27-page memorandum and order.
Melgren’s order noted that “in a little more than six months, Sprint’s stock price dropped almost 70 percent” from $23.25 to less than $7.15.
In addition to individuals, the investors that sued included the PACE Industry Union-Management Pension Fund, Skandia Life Insurance Co. and the West Virginia Investment Management Board.