A group of investors filed a federal lawsuit Tuesday accusing Iomega's top executives of artificially inflating the company's stock price and then bailing out before it sank.
The investors, who are seeking class action status, claim Iomega President and CEO Kim B. Edwards and Chief Financial Officer Leonard C. Purkis sold more than $11 million worth of their stock knowing the value was about to fall.According to the suit, Utah-based Iomega declared last year that a shortage of key components had been resolved, that inventories had been reduced and that sales would be strong with a new product release during the fourth quarter of 1997.
As a result of the "bullish, false and misleading" statements, the value of Iomega stock soared. When it reached about $29, Edwards sold 342,500 shares and Purkis sold 63,000 shares, the suit alleges.
A month later, the company announced disappointing fourth quarter results and disclosed the delays in the release of the new Jaz 2 disk storage product. It also revealed that inventory and component shortage problems had not been resolved and that $100 million would be spent on a new advertising campaign.
Almost immediately, the value of Iomega stock plummeted 32 percent, the suit said. The plaintiffs are stockholders Victor Karacand, Paul Winston, Lorry Wagner and "all others similarly situated." Iomega officials said they hadn't seen the suit and could not comment.