3Com Sued Over $7.35 Mln in Directors' Stock Options
Wilmington, Delaware, Oct. 22 (Bloomberg) -- 3Com Corp., the No. 2
maker of computer networking equipment, was sued by a shareholder who
contends the company misled investors in granting directors $7.35
million in stock options.
3Com officials deceived investors about the value of the options,
approved as part of a director compensation plan at the company's
September annual meeting, according to the suit filed in Delaware
Chancery Court in Wilmington by 3Com shareholder David B. Shaev.
Shaev contends proxy statements issued by the company said the eight
outside directors' options had no value unless the stock price rose.
In fact, Shaev says, the Internal Revenue Service has determined stock
options have measurable value and can be traded for cash. The suit
pegs the 3Com options' value at $7.35 million. ''The option recipients
are receiving grossly excessive compensation for (their) services as
directors,'' Shaev said in his suit, which is seeking class-action
status. ''This is so excessive that no reasonable person (acting) in
good faith would have done it,'' the suit adds.
Shaev is asking a judge to void the options and award unspecified
damages to 3Com shareholders.
Santa Clara, California-based 3Com is the second largest computer
networking company behind Cisco Systems Inc., with sales last year of
more than $5 billion. Officials of 3Com declined to comment on the suit.
It's not the first time 3Com shareholders have accused the company of
misleading them about financial information.
Shareholders filed a spate of lawsuits earlier this year accusing the
company of artificially inflating its share price by issuing false
statements about its $8.54 billion purchase of U.S. Robotics.
The suits contend 3Com officials issued the statements to prop up the
company's share price while selling $190 million worth of shares after
the acquisition was completed in June 1997.
Shares of 3Com rose 1/4 to 33 3/16 today.
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