Lothian takes the lead and sues Ericsson
UK - The Lothian Pension Fund is taking a lead role in a class action against Swedish mobile phone company Ericsson, as it claimed the company issued "materially false and misleading statements" costing the pension fund $3.2m (€2.1m).
Edinburgh City Council is bringing the class action on behalf of the Lothian Pension Fund, valued at just over £3.1bn at March 31 2007, alongside representatives from Fortis Investment Management and Deka Investments.
Legal papers reveal the case, which is being tried in the US, is not only being brought against Ericsson, but also Carl-Henrik Svanberg, chief executive of the company, and Karl-Henrik Sundstrom, the firm's former chief financial officer, as it is claimed they were "privy to confidential proprietary information" and "approved or ratified" public statements from the firm.
Lawyers for the plaintiffs, which under the rules of the class action will also include anyone who purchased Ericsson shares between February 2 and November 20 2007, claimed the defendants broke US federal security laws by having "engaged in a fraudulent scheme and/or published a series of materially false and misleading statements".
The documents allege between February 2 and November 20 2007 Ericsson, Svanberg and Sundstrom issued public statements reassuring the market that demand for its products and services remained strong, even though demand was actually weakening in some markets, particularly in North America and Europe.
As a result, the class action claimed, the Lothian Pension Fund and other investors purchased shares at "artificially inflated prices" and when the true earnings figures were revealed, the price of Ericsson shares fell "more than 46% from their class period high".
The Lothian Pension Fund said it had taken on the case because "class actions have a role in improving corporate governance", adding it is the scheme's policy "to take an active interest in environmental, social, and corporate governance (ESG) issues and not be merely a passive investor".
It added during the period covered by the case, the fund had invested approximately $18.9m into Ericsson, and the fall in share price had resulted in a loss of around $3.2m.
The legal papers, which request a trial by jury, were filed in New York on December 28 2007 by the law firm Labaton Sucharow, but a spokesman for Lothian pension fund pointed out the next step could take between 60-90 days to allow "the detailed evidence needed by the court to be gathered".
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