SHARE

Lucent Settles Class-Action

To avoid further legal costs and remove any taint of impropriety, Lucent Technologies will pay $315 million to settle 54 shareholder lawsuits that alleged that the company violated federal and state securities laws. The Murray Hill, N.J., maker of networking equipment did not admit to any wrongdoing. A judge must approve the payouts. In addition […]

Written By

DS

Datamation Staff

Mar 28, 2003

Datamation content and product recommendations are editorially independent. We may make money when you click on links to our partners. Learn More

To avoid further legal costs and remove any taint of impropriety, Lucent Technologies will pay $315 million to settle 54 shareholder lawsuits that alleged that the company violated federal and state securities laws.

The Murray Hill, N.J., maker of networking equipment did not admit to any wrongdoing. A judge must approve the payouts.

In addition to $315 million in cash and stock, Lucent will issue warrants, estimated to be worth about $100 million.

Lucent’s insurers will contribute another $148 million. And Avaya , a Lucent spin-off, is also responsible for a portion of the settlement. The exact amount is still being determined and will be added to the pool.

“By resolving these legacy issues, we can put all of our energy into running the business and continuing to re-build shareowner confidence in the performance of this company,” Patricia Russo, Lucent’s chairman and CEO said in a statement after markets closed Thursday.

The shareholder settlement comes less than a month after Lucent settled with the Securities and Exchange Commission regarding a probe over how it booked revenues as troubles in the telecom industry were surfacing. Again, Lucent did not admit wrongdoing.

While today’s move will end the suits, it won’t do so quickly. Processing claims will take up to 18 months, and funds won’t be distributed until 2004 at the earliest. Lucent has earmarked another $5 million to administer the settlements.

Lucent’s insurers will contribute $148 million to the settlement’s total. Avaya, a Lucent spin-off, is also responsible for a portion of the settlement. The exact amount is still being determined and will be added to the pool.

Lucent will record a second-quarter charge of fiscal 2003 for approximately $420 million, or 11 cents per share, related to the settlement. This charge may be adjusted in future quarters if Lucent is able to recover a portion of the settlement from other insurance carriers.

The plaintiffs’ attorneys will notify class members about the terms of the settlement and claims administration processes.

Milberg Weiss Bershad Hynes & Lerach was one of the firms representing shareholders. It filed a class-action suit in 2000 claiming that Lucent had over-hyped demand for its optical networking gear and improperly accounted for some deals.

The legal hit came at the same time as the telecommunications sector was descending into a slump that it still has not yet recovered from.