PHILADELPHIA (CN) – In a federal class action, Idearc shareholders sued Verizon for its less than stellar spinoff of Idearc, formerly Verizon’s telephone book division, which has filed for bankruptcy. The class calls the spinoff “a massive, Enron-style debt off-loading spin transaction”.
The class claims that the Idearc flop was “just one of three such transactions accomplished by Verizon Communications [that were] followed by quick bankruptcy – Hawaiian Telecommunications Inc., Idearc Inc., and Fairpoint Communications Inc.”
The shareholders claim Verizon did the spinoff so it “could escape federal taxation,” and resorted to it only “after a series of failed attempts to sell the subsidiary to potential bidders.”
They add that “Idearc, as agent of Verizon, both participated in the fraudulent debt transfers, and now just two years later, in bankruptcy, has caused a cancellation of the common, [sic] since no monies have been lost.”
The class claims the dodge is so transparent they deserve summary judgment for misuse of federal franchise, a securities “fraud on the market,” common law fraud and insider trading.
J.P Morgan Chase Bank also is named as a defendant.
Plaintiffs are represented by Peter Talbot of Media, Pa.