The Plaintiffs’ Case
VIEWPOINT
by Raj Bathal, Robert Follman, Thomas Tucker
Why would anyone want to kill Orange County’s golden goose?
That’s the question we have been hit with since someone began stirring the pot about a shareholder lawsuit that we and 27 others filed against Broadcom Corp. in January.
Although the suit was reported on in the Orange County Register shortly after, no one paid much attention to it until two weeks ago. Then it mysteriously became an overnight front-page story.
Why? We believe this was done to discredit one of the plaintiffs, Tom Tierney, who had been chosen unanimously by the board to lead the Orange County Performing Arts Center (see letter below).
Since then, we and our colleagues have been portrayed as disgruntled investors who have frivolously attacked a local company and its principal officers. Six of the 30 plaintiffs in this lawsuit happen to sit on boards of several institutions, including the Performing Arts Center, which Broadcom founders Henry Nicholas and Henry Samueli are active in and support.
The Broadcom founders have been very generous to OC’s nonprofit community. But that does not create a presumption that they or their company can do no wrong. And, it should be pointed out, that we too have contributed significant time and money in the past 25 years to building OC’s nonprofit institutions.
Yet some of our critics believe that when a person joins a nonprofit board, he signs away the right to conduct business and make decisions in other parts of his life. We respectfully disagree.
We invested in Broadcom because we believed the story of its great track record, its sales growth, future profit potential and its successful acquisition strategy.
In February 2001, the Wall Street Journal reported on a controversial accounting practice the company was using that inflated its revenue. Within a month of the Journal’s story, Broadcom ceased the practice and restated its financials for the previous quarter and year.
Broadcom suddenly looked like a different company than the one the investing public had believed.
In 2001, more than 15 separate class-action suits were filed by shareholders against Broadcom. All of its shareholders who owned stock during the class-action period were automatically included as plaintiffs, unless they chose to “opt out.”
We chose to “opt out” and join a separate lawsuit because as large shareholders who had taken huge losses, we wanted our own lawyers to oversee our interests and large claims, instead of unknown class-action plaintiffs’ lawyers.
Some of our critics see us as sore losers who can’t accept that, like nearly everyone else in America, we lost money on a technology stock. But most of us owned stock in many technology companies whose share prices dwindled last year. We’re not suing them!
We understand that OC is a conservative community, and filing lawsuits goes against the grain. Our decision to follow this course was made only after we truly came to believe that at least some of our losses resulted from an improper practice.
As investors who lost millions of dollars because of this practice, our colleagues and we think we have every right to seek redress. Perhaps we won’t prevail. But someone not in our position shouldn’t suggest that we forego our day in court because it “just does not look good to the community.”
This is not about “friends suing friends,” as only a few of the plaintiffs know the Broadcom founders. What it is about is investing in a company and finding out way too late that it was buying business by giving away future ownership.
The Broadcom lawsuit was filed for business, not personal reasons. We have no animosity toward Broadcom’s founders. We did not pass it through the filter of the Performing Arts Center or any other organization. It is not about those groups. It is about the best way to recover our families’ assets, which were created over a lifetime, and lost almost overnight.
Regardless of what happens with this suit, good people will continue to get involved with the organizations they believe in.
And board members will retain their rights to conduct business and live lives apart from their volunteer activities.
