Compaq has been slapped with a shareholder lawsuit accusing senior executives of ?defrauding? the market to enable them to sell shares at artifically inflated prices.
The class action suit, filed in Houston, Texas, alleges that chief executive Eckhard Pfeiffer, chief financial officer Earl Mason, and 13 other executives withheld certain sales and inventory information and gave misleadingly optimistic accounts of the company's market position. They are also accused of ?stuffing the channel? to achieve what Compaq claimed to be ?an excellent fourth quarter?.
The case was brought by New York law firm Wolf Haldenstein Adler Freeman & Herz on behalf of defendant Mark Berger, who claims he was ?damaged? by purchasing 100 Compaq shares at $62 on 30 October 1997. The suit requires a jury trial and is open to anyone who purchased Compaq common stock between 10 July 1997 and 6 March 1998.
Neil Zola, partner at the law firm, said: ?During the class action period, people bought stock at artifically inflated prices because of an imbalance of information. The suit alleges that during this time some Compaq officers sold stock at articifially inflated prices.?
According to the suit, the defendants ?mispresented? Compaq?s financial results, particularly that it had fallen behind Dell in the market. It also accuses the defendants of selling personal stock before Dell?s success began to erode Compaq?s stock price. The price has also been hit by the PC maker's recent profits warning, caused by an excessive build-up of inventory in the channel and subsequent price cuts.
?Defendants engaged in these fraudulent practices to maintain Compaq?s stock prices at artifically high levels so that they could sell their own stock holdings for huge profits before the truth was revealed,? continues the writ.
A Compaq spokesperson said: ?The claims are without merit and we will defend them vigorously.?
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