Boeing Hit with Class Action Accusing Aerospace Giant of Doctoring Financial Records
Federal class action contends Boeing painted a pretty picture to seal mega-merger; Condit, other company insiders personally named
SEATTLE - Shareholders filed suit today against The Boeing Company and several Boeing officials, claiming the company conspired to conceal production problems and the effects they would have on the company's bottom line until after a merger with McDonnell Douglas was completed. As a direct result shareholders lost more than $4 billion after Boeing recently disclosed the truth, sending the stock's value - crucial to pre-merger negotiations - plummeting.
The suit, filed by Seattle attorney Steve Berman, contends Boeing officials knew as early as April 1997 that production inefficiencies would drastically affect the value of Boeing stock. According to court documents filed in U.S. District Court here today, Boeing officials should have reported the expected problems in quarterly financial documents filed June 30 - prior to shareholder votes on the merger.
"Boeing's management misled company shareholders," says Berman. "When the truth finally came out on Oct. 22-well after the merger was complete and when it was too late-the stock market reacted violently and Boeing shareholders lost billions."
Leading up to final merger discussions, Boeing officials made certain the stock's value would look good to McDonnell Douglas' board of directors and to company shareholders - who would exchange their stock for Boeing shares after the companies joined as one. In order to ensure shareholders would vote to approve this mega-merger, Boeing conspired to hide problems related to a planned jump in production levels and related financial charges.
Boeing officials named in the suit are Chief Executive Officer and Chairman of the Board of Directors Philip M. Condit, Chief Financial Officer Boyd E. Givan and Ronald Woodard, president of the Boeing Commercial Airplane Group. Defendants Condit and Givan unloaded more than 34,000 shares after the merger but before the massive financial charges and production setbacks were announced Oct. 22. Together, they raked in more than $2 million from this transaction.
Not having access to the information Boeing executives had, investors across the country purchased Boeing stock after the merger but prior to third quarter financial reports - at a price Boeing's management artificially inflated, the suit claims.
"This affects small and large investors alike and it's not the way anyone should be doing business in this country. It's unfair, it's illegal and it's just plain wrong," Berman added.
Attorney Steve Berman, a partner in the Seattle firm of Hagens & Berman, recently gained national attention as legal counsel for 13 states in the landmark tobacco settlement and for filing suit on behalf of Northwest farmers devastated by companies that mix toxic wastes with their fertilizers.
This securities class action is brought on behalf of all persons other than the defendants who purchased or otherwise acquired Boeing common stock between July 21, 1997, and Oct. 22, 1997.
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