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July 5, 2001
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Money > Business Headlines > Report July 5, 2001 |
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Sycamore Slapped With Class Action Lawsuit
Ela Dutt In line with the fate of many technology companies that went public over the last two years, Sycamore Networks, founded by Gururaj Desh Deshpande, has also fallen victim to a class action lawsuit which alleges that the company provided misleading information to shareholders at the time of going public in October 1999. Class action lawsuits appear to have become the norm during the economic downturn in the information technology sector, when shareholders are incurring unprecedented losses. In Sycamore's case, the firm of Schiffrin & Barroway, LLP, based in Bala Cynwyd, Pennsylvania, announced on Thursday that the lawsuit was filed in the United States District Court for the Southern District of New York, on behalf of all purchasers of the common stock of Sycamore Networks Inc. (Nasdaq: SCMR). The suit covers the period between October 22, 1999 and December 6, 2000. On or about October 21, 1999, Sycamore commenced an initial public offering of 7,475,000 of its shares of common stock at an offering price of $38 per share and submitted a prospectus to the Securities and Exchange Commission in this connection. The complaint alleges that the prospectus was "materially false and misleading" because it failed to disclose, among other things, that: 1. The underwriter -- Morgan Stanley & Co, Inc; Lehman Brothers, Inc; FleetBoston Robertson Stephens; Credit Suisse First Boston Corporation; Goldman Sachs & Co; and Merrill Lynch, Pierce, Fenner & Smith Incorporated -- had solicited and received "excessive and undisclosed" commissions from certain investors in exchange for which the underwriter defendants allocated to those investors material portions of the restricted number of Sycamore shares. 2. The underwriter defendants had entered into agreements with customers whereby they agreed to allocate Sycamore shares to customers in exchange for which the customers agreed to purchase additional Sycamore shares in the aftermarket at pre-determined prices. The law firm said it is seeking to recover damages on behalf of the class members. Deshpande co-founded Sycamore Networks in 1998 with the vision of creating next-generation optical networking technology that would revolutionise the backbone of the public network. Apart from many other honours and recognitions he and his company have received, in 2001 the International Institute of Boston presented Deshpande with the Golden Door Award, an honour reserved for US citizens of foreign birth who have made outstanding contributions to the American society.
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