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 IBM lobbied Congress hard to pass a law letting it share personal
data of customers in China and elsewhere with the U.S. National
Security Agency, in a bid to protect its intellectual property
rights, according to a complaint filed in the U.S. District Court in
Manhattan.
The plaintiff in the complaint, Louisiana Sheriffs' Pension & Relief
Fund, said this threatened IBM hardware sales in China, particularly
given a program known as Prism that let the NSA spy on that country
through technology companies such as IBM.
The Baton Rouge pension fund said the revelation of Prism and
related disclosures by former NSA contractor Edward Snowden caused
Chinese businesses and China's government to abruptly cut ties with
the world's largest technology services provider.
It said this led IBM on October 16 to post disappointing
third-quarter results, including drops in China of 22 percent in
sales and 40 percent in hardware sales.
While quarterly profit rose 6 percent, revenue dropped 4 percent and
fell well below analyst forecasts.
IBM shares fell 6.4 percent on October 17, wiping out $12.9 billion
of the Armonk, New York-based company's market value.
The lawsuit names IBM, Chief Executive Virginia Rometty and Chief
Financial Officer Mark Loughridge as defendants, and says they
should be held liable for the company's failure to reveal the risks
of its lobbying and its NSA ties sooner.
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IBM spokesman Doug Shelton did not immediately respond to requests
for comment.
The Louisiana fund is represented by Bernstein, Litowitz, Berger &
Grossmann, a prominent class-action specialist. It seeks
class-action status on behalf of shareholders from June 25 to
October 16, 2013, and damages for shareholder losses.
Loughridge is retiring as CFO this month at age 60, which IBM calls
its traditional retirement age.
Martin Schroeter, who has been IBM's head of global finance, is
replacing him.
The case is Louisiana Sheriffs' Pension & Relief Fund v.
International Business Machines Corp et al, U.S. District Court,
Southern District of New York, No. 13-08818.
(Reporting by Jonathan Stempel in New
York; editing by Andrew Hay)
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