Sprint Nextel Corp has agreed to a $131 million settlement of a class-action lawsuit accusing the third-largest U.S. wireless carrier of defrauding investors about problems dating back to its $36 billion merger with Nextel Communications Inc in 2005. The all-cash settlement resolves claims that Sprint, former Chief Executive Gary Forsee and other officials fraudulently inflated the company’s stock and bond prices between October 2006 and February 2008.
Investors said the Defendants falsely touted that Sprint was receiving billions of dollars of benefits from the merger and improving its subscriber base by tightening credit standards. Instead, investors said Sprint was struggling to integrate its cellular networks and was losing hundreds of thousands of subscribers, culminating in a $29.7 billion goodwill writedown in February 2008. All of the Defendants denied liability in agreeing to settle the 6-year-old lawsuit, according to settlement papers filed with the federal court in Wichita, Kan.
The preliminary settlement will require final approval by the court. Japan’s SoftBank Corp now owns 80 percent of Sprint. The settlement fund would give shareholders 26 cents per share of common stock before fees and expenses, a little more than 12 percent of the Plaintiffs’ damages estimate, if all class members participate.
PACE Industry Union-Management Pension Fund, Skandia Life Insurance Co. and the West Virginia Investment Management Board, the lead Plaintiffs in the suit, filed suit in 2009, seeking damages for losses on stocks purchased between October 2006 and February 2008.
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