Pension fund sues IBM for torpedoing China sales with NSA spy program

Dec 14, 2013
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A pension fund has sued IBM for $12.9 billion in revenue losses caused by the recent revelation of its partnership with the US Congress and the NSA to spy on Chinese customers. Many of China's companies pulled out of business arrangements with IBM after it became known that IBM was using its technology to collect customer information for the NSA. The suit cites IBM's open lobbying effort to persuade Congress to pass the bill allowing the spying program known as Prism.

The Louisiana Sheriffs' Pension & Relief Fund claims that IBM failed to disclose the potential financial risks involved with willfully destroying the trust of the world's largest national population. IBM had openly pushed for the legislation "in a bid to protect its intellectual property rights," as Reuters cites the suit. The legislation IBM pushed for resulted in the expansion of spying programs like Prism.

The suit demands class-action damages to compensate shareholders between Jun. 25 and Oct. 16, 2013. IBM sales in China dropped 22% in Q3 2013 following the appearance of the Snowden documents. Hardware sales as a category dropped 40% in that country. Overall revenue dropped 4% and profit increased just 6%, way below IBM's forecasts.

The suit calls out CEO Virginia Rometty and retiring CFO Mark Loughridge in addition to IBM itself. It claims those parties should be held responsible for failing to reveal the financial risks of the lobbying efforts and the company's partnership with the NSA. The US District Court in New York will hear the case.

SOURCE: Reuters
IMAGE: DashBurst


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