No 'Intent to Deceive'
At U.S. Office Products
A federal judge has dashed the hopes of some former shareholders of U.S. Office Products Co. who had filed class action securities fraud claims against the bankrupt firm and its former chief executive, Jonathan Ledecky, ruling that they had failed to show that the defendants "acted with intent to deceive."
In the mid-1990s, U.S. Office Products was one of the region's hottest businesses and Ledecky was hailed as a wunderkind for "rolling up" huge numbers of smaller companies to create one of the world's largest suppliers of office products and business services.
But the company announced in January 1998 that it was planning a restructuring that required major accounting restatements. Its share price dropped by more than 75 percent and nine class action suits were filed in New York and the District, alleging that Ledecky and the firm failed to disclose their plans for the restructuring and the required restatements for six months to keep the stock price artificially high. The cases were consolidated before U.S. District Judge Ricardo M. Urbina in the District.
On July 16, Urbina dismissed all of the allegations, ruling that the shareholders failed to prove that Ledecky and the now-liquidated company had already planned and hidden the restructuring.
Under federal rules, the shareholders could try to file an amended complaint, but Urbina's 24-page ruling made clear he thought their claims had little merit. "We are reviewing the opinion and considering our options," said Daniel S. Sommers, one of the lead attorneys for the plaintiffs.
David P. Donovan, who represented the company, said: "We believe the judge got it exactly correct. There was no evidence of any fraud or that anyone was ever misled in any way concerning USOP's restructuring in 1998."
And John C. Keeney Jr., who represents Ledecky personally, said his client, a former co-owner of the Washington Capitals, is "very pleased that the court recognized that the lawsuits had no merit."