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Nokia faces class-action fraud suit over share price

Nokia is being sued by some of its shareholders on the basis of alleged fraud, but the company says the claims are without merit.The suit (PDF) was filed on Thursday at a New York district court, with the complainants seeking class action status and a jury trial.
Written by David Meyer, Contributor on

Nokia is being sued by some of its shareholders on the basis of alleged fraud, but the company says the claims are without merit.

The suit (PDF) was filed on Thursday at a New York district court, with the complainants seeking class action status and a jury trial. According to lead complainant Robert Chmielinski, Nokia knowingly misled shareholders by claiming its Windows Phone tie-in with Microsoft would be more successful than it turned out to be.

"The defendants participated in a scheme to defraud and committed acts, practices and participated in a course of business that operated as a fraud or deceit on purchasers of Nokia securities during the class period," the suit stated, with the period in question being 26 October 2011 to 10 April 2012.

The case alleges that Nokia, chief executive Stephen Elop and chief financial officer Timo Ihamuotila knew about a data connectivity bug in the Lumia 900 phone before it was released. Nokia acknowledged the bug on the same day it issued a profit warning about its sales during the first quarter of this year.

On that day, 11 April, Nokia's share price dropped by around 16 percent, from $5.03 (£3.12) to $4.24. However, in Nokia's January results statements, Elop had been upbeat about the prospects for Lumia.

"You will see us push forward with the sales, marketing and successive product introductions necessary to be successful," Elop had said. "With a strong balance sheet, our performance in mobile phones and the new excitement around Lumia, we are confident that we are on the right track to build long-term value."

Ihamuotila, meanwhile, had said back in November that "Nokia and Microsoft have the right assets to win in this new game", and that "operators are really backing the ecosystem".

Statements of this kind are as a matter of course accompanied by 'forward-looking statements', which spell out the risks inherent in the market. However, Chmielinski and the other complainants say these disclaimers were "ineffective to shield those statements from liability".

"[The] defendants' statements… were materially false and misleading because Nokia's migration to a Windows platform was not going as well as represented," the lawsuit claimed. "The Lumia 900 had a glitch which forced Nokia to offer a $100 credit and earlier Lumia offerings were not as well accepted as represented."

Nokia said in a statement on Friday that it was reviewing the allegations in the complaint "and believes that they are without merit".

"Nokia will defend itself against the complaint," the company said.

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