IBM Case 06/2/2008

On Monday, June 2nd 2008, lawyers for the plaintiffs announced, that IBM Corp settled a shareholder class action for more thant $ 20 million. The shareholders accused the technology company misled investors, who purchased the company’s stock during a nine-day period in 2005 about employee stock-option expenses. The settlement was reached one year after the Securities and Exchange Commission determined that IBM’s conduct had violated federal law. However, the SEC stopped short of finding that fraud had been committed, and it imposed no fine on IBM. Nine days before the company made the announcement, Chief Financial Officer Mark Loughridge indicated to analysts that accounting for stock options would cost 14 cents per share. The cost turned out to be 10 cents per share, and some analysts complained that IBM originally gave the higher figure in order to artificially lower expectations for the quarter and cushion disappointing business results. The lawsuit contended IBM Corp knew the true value when its CFO provided the 14-cent estimate. IBM Corp spokesman Fred McNeese confirmed the settlement, but said the company maintains that it did not misrepresent information to investors. The agreement has received preliminary approval from Judge Alvin K. Hellerstein in the U.S. District Court for the Southern District of New York and is scheduled for a fairness hearing Sept. 9.