Sprint Settles With Class for $131 Million

KANSAS CITY, Kan. (CN) - Sprint will pay $131 million to settle a class action from investors who claim it defrauded them in its $36 billion merger with Nextel in 2005.

Defendants Sprint Nextel Corp., former Sprint chairman and CEO Gary D. Forsee, former Sprint CEO Paul N. Saleh and former Sprint CFO and Controller William G. Arendt denied wrongdoing or liability in the proposed federal settlement .

The settlement, which is pending approval , stipulates the defendants will pay $131 million in cash into a court-supervised settlement fund to cover investors' attorneys' fees and claims.

The settlement came after more than five years of complex, which produced 8.7 million pages of court documents and included multiple mediation sessions with a mediator and retired judge, who offered the settlement proposal.

The class consists of everyone who bought or acquired common stock of Sprint Nextel Corporation between Oct. 26, 2006 and Feb. 27, 2008.

Lead plaintiff PACE Industry Union-Management Pension Fund claimed that Sprint and its executive defendants issued false and misleading statements about the merger, including empty promises that Sprint would receive billions of dollars in merger synergies and that Sprint had improved its customer mix as a result of tightening credit standards when it had actually loosened them. They also claimed that Sprint traded its stock at inflated levels from 2006 to 2008.

"By misrepresenting demand for Sprint's products, the defendants presented a misleading picture of Sprint's business and prospects. Thus, instead of truthfully disclosing during that Sprint's business was not as healthy as represented, defendants misrepresented the benefits of the Nextel acquisition," the complaint stated.

The class called the merger a "disaster" due to culture clashes and technological issues, and claimed that "Sprint included its false financial statements and results in press releases and in its SEC filings."

Sprint told the Kansas City Star that it "reached an agreement to settle this matter to avoid further expense and distraction of this litigation."

The $131 million settlement represents a recovery of 12 percent of the estimated aggregate damages, according to lead plaintiffs' counsel.

A Tuesday hearing for approval of the settlement was canceled and has not yet been rescheduled.

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