According to lawyers for lead plaintiff institutional investor Carlson Capital, L.P., a private money management fund, the suit alleged a breach of fiduciary duty against Sprint directors and management in connection with a stock conversion. The lawsuit centers on the company’s handling of a complex conversion of stock in which two separate tracking stocks – PCS and FON – were “recombined” into a consolidated common stock. The transaction brought “substantial” profit to directors and management at shareholder expense, the plaintiffs charged, according to law firm Grant & Eisenhofer P.A..
The suit alleges that the company illegally engineered a stock recombination by manipulating conversion ratios of the tracking stocks, grossly overvaluing Sprint’s declining land-line business. It points the finger of blame at former Sprint CEO William Esrey and COO Ronald LeMay, both of whom were forced to resign in 2003.
Last fall, several months after the shareholder lawsuit was filed, Sprint took a $3.6 billion write-off on the FON operations, according to the plaintiffs. The case is scheduled for trial in early 2006.