(CN) – An angry investor sued Intel and its top executives, saying their arrogance and stonewalling in the face of multiple misconduct charges have put shareholders on the hook for more than $2.7 billion in fines and settlements. The shareholder says the executives, not the shareholders, should pay the bills.
Charles Gilman’s claim in Delaware Federal Court follows Intel’s $1.25 billion settlement of a lawsuit from rival chipmaker Advanced Micro Devices, and the European Union’s record $1.45 billion fine imposed in May for anti-competitive behavior.
It also comes on the heels of an antitrust case by New York Attorney General Andrew Cuomo, who on Nov. 4 accused Intel giant of using “bribery and coercion to maintain a stranglehold” on the semiconductor market.
The defendants in Gilman’s claim are CEO Paul S. Otellini, former CEO and ex-Chairman of the Board Craig Barrett, directors James Plummer and Susan Decker, and former directors Carol Bartz, D. James Guzy, David Pottruck, Jane Shaw, David Yoffie, Charlene Barshefsky, John Donahoe and Frank Yeary.
Gilman accuses them of breaching their fiduciary duty and misconduct in the EU regulatory claims; failing to take remedial measures in the face of known misconduct; and failure to implement remedial corporate governance and audit procedures after all the cases came to light.
He wants the court to declare the corporate bigwigs, not innocent shareholders, liable for fines and settlements stemming from their malfeasance. He also asks the court to require Intel’s current directors to implement remedial corporate governance and audit procedures.
Gilman claims the defendants engaged in two forms of illegal acts to maintain the company’s dominant position in the x86 CPU market: they gave hidden rebates to computer manufacturers on condition they bought all their x86 CPUs from Intel; and they paid computer manufacturers to stop or delay the launch of products containing competitors’ x86 CPUs.
Gilman said he tried for more than 18 months, through demand letters, and in one case a meeting with the counsel for the Audit Committee, to start an investigation into these actions, but his efforts proved fruitless.
“Indeed, shareholder demands have been met with outright hostility, which can only bespeak bad faith,” the complaint states.
Gilman says Intel’s Audit Committee must have known about the antitrust allegations, and that the claims “had a strong basis in fact.” But he says the committee refused to enact remedial measures. Instead, he says, senior executives and the board of directors tired to run out the clock on the statute of limitations through foot-dragging and inaction.
“In sum, the board members have not acted independently with regard to shareholder demands, but rather have responded as would guilty parties seeking to evade responsibility,” Gilman says.
“This action is necessary to protect Intel and its shareholders from the actions of its senior executives, as well as from a Board of Directors that is all too happy to aid and abet them in a cover-up of their misconduct.”
Gilman is represented by Robert Goldberg with Biggs and Battaglia of Wilmington, Del., and Roy Jacobs and Laurence Paskowitz with Paskowitz & Associates of New York.