AT&T Reaches $100 Million Settlement In Shareholders' Lawsuit

AT&T and a former subsidiary will pay $100 million to settle a shareholder class-action lawsuit that sought $2.4 billion for alleged fraud.

October 27, 2004

2 Min Read
Network Computing logo

NEWARK, N.J. (AP) AT&T Corp. on Tuesday said it and a former subsidiary will pay $100 million to settle a shareholder class-action lawsuit that sought $2.4 billion for allegedly fraud in financial forecasts issued by the company's chairman and chief executive.

The deal came nearly three weeks after a trial began in Trenton before U.S. District Judge Garrett E. Brown Jr., who must still approve the terms. A hearing is set for Feb. 28.

AT&T said the payment would be split between the company and its former broadband subsidiary, which was sold to Comcast in 2002. AT&T said it would seek reimbursement from its insurers.

``As we have said all along, we categorically deny any wrongdoing by AT&T or any of its officers and remain confident that we would have been vindicated at the end of this trial,'' said Edward R. Barillari, vice president-law and government affairs. ``But, given the size of the claims compared to the relatively low amount of the settlement, the inherent risk and uncertainty of legal proceedings, and the very substantial expense of those proceedings, this settlement is the prudent course for the company.''

The company is determining what effect the settlement will have on its recently announced third-quarter earnings, but cannot say when the information will be available, spokesman Bob Nersesian said.The lawsuit was brought in October 2000 on behalf of those who bought stock from Dec. 6, 1999 to May 1, 2000, according to AT&T and court records.

One of the lawyers for the plaintiffs, Peter S. Pearlman, said the lawsuit charged that then-AT&T chairman and chief executive C. Michael Armstrong knowingly overstated revenue growth for the company's business division.

Armstrong first made the projection of 9 percent to 11 percent growth for 2000 during a conference call with analysts Dec. 6, 1999, and the guidance was repeated until revised downward on May 2, 2000, Pearlman said.

``There is no safe harbor protection for statements that were knowingly falsely made,'' Pearlman said. ``In our view, and in the view of people testifying for us, there was no basis to make that projection.''

Pearlman had no immediate estimate of the number of individuals and institutions who may qualify as plaintiffs.Plaintiffs included the New Hampshire Retirement System, which has 72,000 members and beneficiaries, and Local 98 of the International Brotherhood of Electrical Workers, in Philadelphia, with about 4,000 members.

AT&T stock closed up 20 cents Tuesday at $16.30 on the New York Stock Exchange.

SUBSCRIBE TO OUR NEWSLETTER
Stay informed! Sign up to get expert advice and insight delivered direct to your inbox

You May Also Like


More Insights