A state court in Kansas has given the go-ahead to shareholders to wage a class action battle against Sprint, its CEO and its directors for breach of fiduciary duty. Potential liability in the suit could be as high as $10 billion. The decision was issued by Judge Kevin P. Moriarity, district judge in Johnson City, KS.
The central allegations are tied to the issue of conversion of the two tracking stocks –FON and PCS –in a skewed manner that unfairly benefited certain directors, rather than the company’s shareholders. The suit is brought by institutional investor Carlson Capital. Last fall, several months after the shareholder lawsuit was filed, Sprint took a $3.6 billion write-off on the FON operations, essentially admitting that the land-line business was highly overvalued at the time of the combination. “With that write-off, the company made a de facto admission that it grossly overpaid for the FON stock – we argue that it’s time to transfer that value rightly to PCS shareholders,” said attorney Jay Eisenhofer, name partner at Grant & Eisenhofer, who argued the motion for Carlson Capital.
I wonder if this means problems with the Sextel-deal.