A federal judge has ruled that Iomega's top executives did not artificially inflate the company's stock prices during the fourth quarter of 1997.
In a separate court proceeding, a settlement to a class-action lawsuit against Iomega regarding faulty drives and charges to customers for technical support calls on toll-free 800 and 888 phone lines is being proposed in New York.Stockholders Victor Karacand, Paul Wilson and Lorry Wagner filed suit in Utah last year claiming then-Iomega president and chief executive officer Kim B. Edwards and chief financial officer at the time Leonard C. Purkis made misleading statements about the company and then sold more than $11 million of stock knowing the value was about to fall.
The stockholders accused the Iomega executives of overstating in press releases and press statements the demand for Iomega products, misrepresenting the probable release date of the Jaz 2 disk storage product, misrepresenting component quality and supply problems and concealing a planned $100 million advertising campaign.
In dismissing the suit Friday, U.S. District Judge Dale A. Kimball found no evidence that statements about the Jaz 2 were false at the time they were made. The judge also ruled the stockholders had not identified any statement or document indicating Jaz 2 problems could not be resolved in the fourth quarter, or that a delay in releasing Jaz 2 would significantly impact the fourth quarter performance.
Kimball said Iomega's filings with the Securities and Exchange Commission contained cautionary disclosures, and investors were warned of delays. The judge also ruled that investors were warned in SEC filings not to rely on past performances. He also ruled the stockholders had failed to identify one statement that would have rendered the company's advertising plan as misleading.
In New York, Christian Champod filed a lawsuit on behalf of himself and others claiming the packaging of Iomega's Zip, Ditto and Jaz drives implied technical support would be free when in fact certain customers were charged a fee; and that certain Iomega Ditto drives could not read data stored or written on one of the types of tapes or formats Ditto packaging claimed the drives could read.
Under proposed settlement, Iomega would pay $7.50 to each person who incurred a $14.99 charge for Ditto or Zip service calls; or $10 for each Jaz call that incurred a $19.99 charge by Iomega. Attorneys' fees will be subtracted from those amounts.
Regarding incompatible Ditto drives and cartridges, Iomega plans to make modified Ditto software available on the Web or by mail; translate data on cartridges that cannot be read with the modified software; and give customers the option of returning Ditto drives if Iomega is unable to translate tapes and cartridges submitted by customers.
A hearing on the proposed settlement is scheduled July 28 in the New York Supreme Court. Full detail of the settlement proposal can be seen at Iomega's Web site, http://www.iomega.com, under the "information about legal settlements" listed at the bottom of the home page.