OAKLAND – JDS Uniphase Corp. did not have secret internal data foreshadowing the dot-com bust in 2000, suffering along with the rest of the industry when tech-related spending evaporated, attorneys for the telecommunications company said Wednesday.
Investors claim in a class-action lawsuit filed in Oakland federal court that the Milpitas company masked a serious downturn in orders as the company embarked on an acquisition spree it couldn’t afford.
The case, which went to trial this week, represents a rare instance in which a shareholder lawsuit against a corporation has gone to trial. Most cases are settled or tossed out before ever going in front of a jury.
Jim Bennett, a JDS Uniphase attorney, told jurors during his opening remarks Wednesday that the company was blindsided by the collapse. Lawyers also said the sale of $500 million in stock by four former executives as sales were crumbling was entirely proper.
“JDSU was not alone in this experience,” Bennett said. “This was in industrywide decline, not something that uniquely affected JDSU, and not something uniquely foreseeable to that company and its executives.”
The lawsuit, filed by the state of Connecticut and other plaintiffs, accuses JDS Uniphase of duping investors about the company’s growth prospects while executives reaped a windfall.
The lawsuit does not pinpoint shareholder losses, but JDS Uniphase says the plaintiffs are seeking more than $20 billion in damages.
Four former executives – Jozef Straus and Kevin Kalkhoven, both former chief executives, former Chief Financial Officer Anthony Muller and former Chief Operating Officer Charles Abbe – are named as co-defendants. They all appeared in court Wednesday.
Collectively, they unloaded more than $500 million in stock between 1999 and 2001, with most of the sales occurring in August 2000, according to the lawsuit.
Bennett, who represents the company and Straus, Muller and Abbe, and defense lawyer Michael Shepard, who represents Kalkhoven, said Wednesday the executives’ trades fell within their normal trading patterns – they only have limited windows when they can sell stock – and that many of the trades involved stock options that had just vested.
The trial is expected to last about three weeks. It comes after five years of the document-swapping legal process known as discovery and mandatory pretrial settlement talks.
On Tuesday, plaintiffs’ lawyers delivered their opening remarks.
JDS Uniphase’s products were snapped up by telecom carriers building expensive fiber optic networks to handle mounting Internet traffic from the flourishing dot-com companies.
When demand withered, the company suffered mortifying losses of $65 billion in 2001 and 2002, more than 16 times as much as the roughly $4 billion in revenue the company pulled in during those years. It has failed to turn an annual profit since.
The lawsuit claims the company knew the downturn was coming but hid that revelation to keep Wall Street happy while executives enriched themselves and the company used its soaring stock to fund billions of dollars in acquisitions.