Lawyers counter JDS Uniphase fraud charges

By Amanda Beck

OAKLAND, Calif., Oct. 24 (Reuters) - Former top executives at JDS Uniphase Corp. did not know the company would collapse in 2001 as shareholders allege in a lawsuit, lawyers for the executives said on Wednesday in the second day of a trial over $18 billion lost from investments in the company's shares.

The case in U.S. District Court in Oakland, California, alleges that JDS Uniphase (JDSU.O), a former darling of the dot-com boom, and four former executives cost shareholders $18 billion when they deceptively painted a rosy financial picture of a company whose stock was about to tank.

JDS Uniphase and the four former executives -- chief executives Kevin Kalkhoven and Jozef Straus, chief financial officer Anthony Muller and chief operating officer Charles Abbe -- are accused of securities fraud and insider trading.

Their lawyers said the company believed its outlook was bright amid the dot-com boom and expected orders for its equipment to grow.

"The incredible growth which the telecom industry had experienced up through the end of the year 2000 was expected to continue for the foreseeable future," attorney James Bennett said in court.

The downturn was "unexpected and unpredicted," he added.

"This was an industry-wide decline, not something that was unique to JDSU or something that was somehow uniquely foreseeable by that company," Bennett said.

JDS Uniphase makes and supplies fiber-optic network components to telecommunications providers. Investors embraced the company during the dot-com boom, when it went on a dizzying merger spree, but then soured on JDSU, which rang up a staggering $50.6 billion net loss in fiscal 2001, when business spending on telecom products stalled.

JDS Uniphase shares plunged 99 percent and the company laid of thousands of workers.

In 2002, investors filed a class action lawsuit claiming the company and its executives knew a fallout was coming and that, instead of informing the public, they touted JDS Uniphase in conference calls, securities filings and press releases, and that they used insider information to sell hundreds of millions of dollars in company stock near its high.

The four executives on trial sold more than $350 million in JDS Uniphase stock between July 31, 2000 and Aug. 31, 2000, and other insiders sold another $503 million in stock, plaintiffs' attorney Barbara Hart said on Tuesday.

Defense attorneys said the executives had few other windows in which to exercise stock options, partly because JDS Uniphase was involved in several mergers.

They also said the executives sold a smaller percentage of available shares in August 2000, when the company was hiring and making new capital investments, than the executives had in the past. After August, they retained 72 percent of their former interests in the company, Bennett said.

"Mr. Kalkhoven in good faith believed the company was in good shape. It was in good shape," attorney Michael Shepard said. "I predict that the plaintiffs will prove that Mr. Kalkhoven is very rich. But if that constitutes securities fraud, then I should sit down now." (Reporting by Amanda Beck in Oakland, California)