Covad settles Calif. class action suit
Covad Communications Group Inc. signed a memorandum of understanding with lead plaintiffs in a securities class action lawsuit filed in a California federal court.
The DSL provider says it will contribute to a settlement fund shares equal to 3.5 percent of its fully diluted common stock as of Aug. 10. Its insurance will cover the cash portion of the settlement. Asked about specific numbers, "We aren't talking about that," says Covad spokeswoman Martha Sessums.
The lawsuit was filed late last year and pertained to the company's restating of its numbers, Sessums says. Several shareholders filed, and the cases were combined.
Covad notes in a statement that it and the other defendants continue to deny plaintiffs' allegations.
Like many public high-tech companies, Covad has seen its share of shareholder angst in action. As opposed to the settled lawsuit, the "laddering" actions name everyone that played a role in bringing the company public, Sessums says, adding that, "We consider those nuisance lawsuits."
Friday, lawyers on behalf of shareholders filed a "putative class action complaint" in the U.S. District Court for the Southern District of New York against Covad, and certain officers and directors, and the underwriters involved in the company's January 1999 IPO. The complaint alleges the company and others issued the common stock "without disclosing to investors that some of the underwriters in the offering, including the lead underwriters, had solicited and received excessive and undisclosed commissions from certain investors."
In April, an organized committee of bondholders sent a letter to Covad directors and officers, advising them of their obligations to creditors, and telling them to cease wasting the remaining cash, and to manage the company and its assets.