Four former executives of JDS Uniphase did not commit securities fraud or engage in insider trading when they sold more than $350 million in JDSU stock before its price plunged in 2001, a U.S. jury said Tuesday.
The jury gave its verdict after two days of deliberation in U.S. District Court in Oakland, California, where it heard nearly three weeks of testimony from witnesses including the former executives, who took the stand in their own defense.
The verdict was the culmination of nearly five years of litigation aimed at the company and its former officials: Kevin Kalkhoven and Jozef Straus, former chief executives; a former chief financial officer, Anthony Muller; and a former chief operating officer, Charles Abbe.
The suit alleged JDSU , a supplier of components of fiber optic telecom networks, and its executives cost shareholders $18 billion by painting a rosy financial picture of a company whose stock was set to plunge.
Barbara Hart, a lawyer for the shareholders, told Reuters it was too early to say if they would appeal the verdict.
The suit was a rarity, pitting former shareholders against the company in which they invested and the executives paid to run it. Only about 1 percent of securities class-actions go to trial because they are usually dismissed or settled.
Investors embraced JDS Uniphase during the dot-com boom but soured on it in 2001 as business spending on telecommunications gear stalled. The company rang up a staggering $50.6 billion net loss in fiscal 2001 and its shares dropped 99 percent.
Those who lost out include 160,000 firefighters, teachers, and other public employees invested in the Connecticut Retirement Plans and Trust Funds, which lost about $65 million, more than any other shareholder.
In 2002, the funds sued on behalf of all those who owned stock between April 2000 and July 2001. They claimed that executives must have known in 2000 that their customers were reducing next year's orders by more than $1 billion.
But instead of informing the public, they touted their company in conference calls, securities filings and news releases while dumping hundreds of millions of dollars in company stock near its high, plaintiffs said.
The four defendants sold $359 million in stock between July 31 and August 31, 2000, and other insiders sold another $503 million worth, Hart said.
Defense attorneys countered the executives sold a smaller percentage of their shares in August 2000 than they had in the past and collectively retained 72 percent of their former interests in the company.
Jurors found there was not enough evidence showing either that the executives behaved uniquely in the trading period or that they knew the industry would implode.
"That was the main thing -- the lack of the ability to forecast what would happen in 2001," juror Ann Nelson said.
Kevin Kennedy, president and chief executive of JDSU, said the company was "gratified" by the verdict as it had maintained the plaintiffs' claims were without merit.