Lucent will pay $315m to settle class action
Line drawn under the affair
Lucent Technologies announced yesterday that it reached an agreement to settle all pending shareowner and related litigation against the company, its current and former officers and directors, and certain other defendants.
The networking manufacturer did not admit any wrongdoing as part of the settlement, worth up to $315 million in cash and stock. Lucent's offer is subject to court approval.
Lucent his decided to offer a settlement in order to draw a line under the affair. The firm has been particularly hard hit by the slowdown in telecoms spending and needs to direct its energies into restructuring its business.
The agreement is a global settlement of what were 54 separate lawsuits, including the consolidated shareowner securities class action lawsuit in the US District Court in Newark, NJ, and all related ERISA, bondholder, derivative and state securities cases. The lawsuits alleged that the company violated federal securities laws and related state laws by overstating its profits.
"This settlement puts all pending shareowner and related litigation behind us," said Patricia Russo, Lucent's chairman and CEO, in a statement. "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."
Under the agreement, Lucent will pay $315 million in common stock, cash or a combination of both, at the company's option. Lucent will seek to recover $70 million of this outlay from its insurers.
The company expects the settlement approval and claims administration process to last up to 18 months and doesn't expect to distribute any proceeds until sometime in fiscal 2004. Lucent will pay up to $5 million for the cost of settlement administration.
Lucent spin-off Avaya is contractually responsible for a portion of the settlement. Its contribution to the settlement is still being determined and will be added to the total settlement fund.
Lucent expects to record a charge in the second quarter 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 its insurers.
The plaintiffs' attorneys will notify class action members about the terms of the settlement and claims administration processes. ®