The Lothian Pension Fund invested nearly £10 million in the Swedish telecommunications giant following what turned out to be “false and misleading” pronouncements made by top Ericsson officials.
The value of Lothian’s Ericsson holdings dropped by more than 20 percent in 10 months following revelations that demand for Ericsson products was not nearly as strong as the company suggested.
The suit is being filed in New York by the Edinburgh City Council on behalf of Lothian, which has added its name to the growing list disgruntled investors wanting to hold Ericsson to account.
“We are seeking recompense for the value of the losses suffered,” said Esmond Hamilton, a fund accounting manager with Lothian, which manages pensions for 67,000 public sector employees.
“We believe there is a case to be made.”
According to documents filed in the case, the suit alleges that Ericsson CEO Carl-Henrik Svanberg and former chief financial officer, Karl-Henrik Sundström participated in a “fraudulent scheme” of statements February and October of 2007 which deceived the markets and investors about the true state of demand for Ericsson products.
The suit claims that several investors, including Lothian, purchased shares “at artificially inflated prices and were damaged economically when the price of Ericsson securities dropped upon disclosure of the scheme.”
Ericsson spokesperson Fredrik Hallstan said the company wasn’t overly concerned about the case at this stage, as many details remain to be worked out before the suit advances.
“Of course it’s never fun to be involved in a lengthy legal process, but we’re not worried at this stage,” he said.
“We don’t have all the information yet, and until we do there’s not much more I can say.”
According to Hallstan, the next significant step forward in the case won’t likely occur until later in the spring once lawyers have worked out the structure of the class action suit, including which parties will be given lead plaintiff status.