Tellabs investors' lawsuit reinstated

Rocky Staff And Wire

Friday, January 18, 2008

An Illinois telecommunications equipment maker must face a securities fraud lawsuit claiming the company and then-CEO Dick Notebaert made misleading statements about its financial prospects.

The case involving Tellabs Inc. previously reached the U.S. Supreme Court, which ordered a lower court to reconsider whether the plaintiff investors had shown that Notebaert knew the statements were misleading when he allegedly made them.

"It is conceivable," wrote U.S. Circuit Judge Richard Posner in Chicago in a decision Thursday, that Notebaert was repeating misstatements fed to him by others, "but it is exceedingly unlikely."

Investors sued Naperville- based Tellabs in 2002, claiming that between December 2000 and June 2001, Notebaert made overly optimistic claims about the company's performance while demand for its principal products was declining.

Tellabs shares fell from $67.18 on Dec. 2, 2000, to $16.04 the following June as the company began scaling back projections.

Notebaert left Tellabs in June 2002 to become CEO of Denver-based Qwest Communications, replacing Joe Nacchio. Notebaert retired from Qwest last summer.

He couldn't immediately be reached for comment Thursday.

But Tellabs spokesman George Stenitzer reiterated previous assertions that "the allegations will ultimately be shown to be without merit."

Notebaert reportedly didn't sell any Tellabs stock during the period in question.

U.S. District Judge Amy St. Eve in Chicago had dismissed the suit in 2004, ruling that shareholders hadn't satisfied the heightened standards of the federal Private Securities Litigation Reform Act of 1995.

When the U.S. Court of Appeals in Chicago reversed St. Eve's ruling, Tellabs appealed to the Supreme Court.

Notebaert found unlikely allies in the Supreme Court case. Both the Securities and Exchange Commission and the Justice Department, also concerned about higher standards facing CEOs, wrote briefs in support of Tellabs and Notebaert.

Staff writer Jeff Smith contributed to this report.

• January 18, 2008

  6:16 p.m.

  Suggest removal

  Colin07 writes:

  Isn’t it curious that the Notebarert Tellabs news is reported as a federal court rules that Notebarert, Qwest, and a federal judge may have been wrong in excluding Joe Nacchio and former CFO Bob Woodruff from a scheduled $400 million class-action settlement?

  Notebarert led the big (unnecessary?) $2 billion write down to free the Qwest board of directors from being investigated by the government and to blame Nacchio for shareowners losing money when the telecom market melted down and Wall Street reacted negatively.

  It looks like Nacchio and Notebarert are being harassed while shareowners get nothing and the lawyers make money again. Of course neither Nacchio nor Notebarert are guilty of anything until after a fair trial.