| OAKLAND, Calif.
OAKLAND, Calif. Oct 23 Lawyers in one of the
biggest shareholder suits to go to trial on Tuesday said JDS
Uniphase Corp. JDSU.O and four of its former top executives
lost $18 billion for investors by painting a rosy picture of
the company's finances when its stock was about to collapse.
JDS Uniphase, a dot-com boom darling, and its former
officials -- chief executives Kevin Kalkhoven and Jozef Straus,
chief financial officer Anthony Muller and chief operating
officer Charles Abbe -- are accused of securities fraud and
"They knew in the year 2000 what was to come in the year
2001," plaintiffs' attorney Barbara Hart said in court.
"Instead of telling the public, they cashed out, selling
hundreds of millions of dollars of stock, benefiting
JDS Uniphase makes and supplies components for fiber-optic
networks to telecommunications providers. Investors embraced it
during the dot-com boom as it went on a dizzying merger spree,
but they quickly soured on JDSU, which rang up a staggering
$50.6 billion net loss in fiscal 2001 when business spending on
telecommunications products stalled.
Its shares plunged 99 percent.
Lawyers for JDS Uniphase are scheduled to present their
opening arguments in U.S. District Court for the Northern
District of California in Oakland, California on Wednesday and
have said in court filings that the company and its former
executives acted appropriately.
Only an estimated 1 percent of securities class-actions
ever go to trial, because they usually are dismissed or settled
Investors who lost money on the shares include 160,000
firefighters, teachers and other public employees invested in
the company through Connecticut Retirement Plans and Trust
Funds, which lost about $65 million, the largest loss for any
one shareholder in JDS Uniphase.
In 2002, the pension system sued on behalf of all those who
owned JDS Uniphase stock between April 2000 and July 2001, a
period of time when company officials were deliberately
deceptive about the company's future, according to plaintiffs'
"They were hearing from major customer after major customer
that there were problems," Hart said, noting how the company
had fallen behind on a research project for Lucent, its largest
customer, and how executives expected a reduction in business
from the company's second-largest customer, Nortel.
At the time, orders from the two companies comprised 37
percent of JDS Uniphase's sales revenue, said Hart.
Insiders began selling hundreds of millions of dollars in
JDS Uniphase stock while assuring investors in conference
calls, securities filings and press releases that prospects for
the company were good, Hart said.
The four executives who are defendants in the case sold a
total of more than $350 million in JDS Uniphase stock between
July 31 and Aug. 31, 2000, and other insiders sold another $503
million in stock, Hart said.
"This case was flying below the radar," said Catherine
LaMarr, general counsel for Connecticut's Office of the State
Treasurer. "However, we have a group of very wealthy
individuals from this company who benefited from their own bad
acts. We took a look at our substantial losses and decided to
take a stand."