Richard Li sued over false Stanford degree claims
2001-04-22
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Tycoon Richard Li Tzar-kai has been hit by a class action lawsuit in New York that claims his Stanford University "false credentials" formed part of bogus or deceptive statements used to woo investors for a Nasdaq-listed dotcom.
Investors in the United States have banded together to sue the Pacific Century CyberWorks (PCCW) chairman and other executives of the Web site Rediff.com India for unspecified damages.
It is alleged Mr Li and his fellow executives at Rediff flouted US securities laws in connection with the sale of shares in the company based on the various misstatements and omissions.
PCCW holds a five per cent stake in the dotcom, with Mr Li named as a director in the lawsuit.
In a 55-page writ, the investors claim vital information was held back and untrue or misleading statements were made before an initial public offering of shares in June last year.
A prospectus aiming to win investors had falsely stated that Mr Li was a graduate of Stanford University.
"This misled purchasers of the IPO to believe that Rediff had put together a superb management team when in fact it had not," the investors claim.
The company, moreover, did nothing to amend the public document despite press reports that exposed the falsity, their claim states.
"Mr Li had admitted that his falsehood may lead to SEC (Stock Exchange Commission) fines," the writ continues, "and Mr Li has requested that Rediff amend its public filings.
"Nonetheless, Rediff has not done so, although it has issued numerous press releases and SEC filings since first being informed of the falsity of its prior disclosures."
Mr Li's lack of a Stanford degree came to light in Hong Kong last month, prompting the PCCW boss to admit he had "done wrong" by allowing himself to be described as a graduate of the university.
The tycoon admitted his company had for years described him as a Stanford graduate when in fact he had abandoned his computer engineering studies in 1987, nine months before finishing the course.
He went to work for investment bank Gordon Capital in Toronto instead.
The US lawsuit is scheduled to be heard in the New York District Court, with investors seeking a jury trial. Mr Li could thus be called as a witness.
Neither Mr Li nor his father, tycoon Li Ka-shing, commented on the class action yesterday.
Mr Li senior only remarked: "Richard has spoken on this (Stanford University issue) before, and I will make no comment."
PCCW also declined to comment yesterday.
The lawsuit also states that Rediff reaped net proceeds of US$ 59 million (HK$ 459 million) from the IPO, but had failed to reveal crucial facts about its business prospects and the use of proceeds.
It is alleged that the core Internet business was experiencing difficulty with its e-mail software even before the IPO and many significant advertising contracts were on the brink of termination, a potential blow to revenue.
The investors in the lawsuit bought shares in the company between June last year and this month.
IPO underwriters Goldman Sachs, Credit Suisse First Boston and Robert Fleming Inc are also named as defendants in the lawsuit.
Attempts are also under way by shareholders in PCCW to lobby for support to launch a similar lawsuit against Richard Li in the United States.
According to one protagonist, at least 100 shareholders must support the idea before any action can be taken. If they reach this level, the shareholders hope to take legal steps against Richard Li and CyberWorks at the end of the month.
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