AP News, September 25th, 2007
Sprint Nextel Corp. has proposed paying $57.5 million to settle a class-action lawsuit claiming it robbed billions of dollars from shareholders when it combined two tracking stocks in early 2004.
Johnson County District Judge Kevin Moriarty has given the settlement preliminary approval and has scheduled a hearing in December to consider giving it final approval.
If approved, the payment would amount to 4.4 percent of $1.3 billion, the low end of estimated losses claimed by the plaintiffs.
Sprint Nextel would pay $10 million, while insurance would cover the remaining $47.5 million. The company continued to deny any wrongdoing, saying it wanted to avoid the costs of continuing to fight the lawsuits.
"This settlement resolves a dispute that arose during an earlier period for the company," said company spokesman Matt Sullivan. "We are pleased to put the issue behind us."
An attorney for the plaintiffs didn't immediately return a phone call Tuesday.
The settlement is Sprint Nextel's third in the past month.
Sprint Nextel has agreed to pay $57 million to settle a discrimination lawsuit claiming it targeted older workers during rounds of companywide layoffs and $30 million to settle a suit alleging it and AT&T overcharged customers for payments used to subsidize rural phone service.
Sullivan said the proximity of the settlements was a coincidence.
The latest case came about after then-Sprint Corp. decided to combine the two stocks that tracked the fortunes of its wireless and traditional wireline business divisions. Those stocks were divided in 1998 to reflect that the wireless division was just starting to grow and invest in wireless infrastructure while the business overseeing local and long-distance calls generated the bulk of the company's revenue.
By 2004, with most telecommunications companies selling bundles of wireless and land line services, Sprint officials decided to recombine the stocks, exchanging each of the wireless stock shares for half a share of the wireline stock.
Shareholders erupted, with half a dozen filing lawsuits claiming the company had shortchanged the value of the wireless stock and that company officials had manipulated the wireline business to the detriment of the wireless business.
The plaintiffs' attorneys hired experts who estimated the losses to shareholders ranged from $1.3 billion to $3.4 billion.
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Information from: The Kansas City Star, http://www.kcstar.com
