The City of Edinburgh council’s pension fund has committed itself to an aggressive pursuit of Swedish telecoms giant Ericsson in a US court.
The £3.1 billion Lothian Pension Fund, together with several other investors, has filed a class-action suit against Ericsson, which it accuses of artificially inflating its own share price between February and October last year. The suit, filed with the US District Court in New York, alleges Ericsson did this by “disseminating materially false and misleading statements.”
The suit alleges that Ericsson’s chief executive, Carl-Henrik Svanberg, and its former chief financial officer, Karl-Henrik Sundström, misled investors about the strength of demand for Ericsson products at a time when “demand for the company’s products was weakening in many markets, particularly in Europe and North America.”
A spokesman for Edinburgh City Council, which looks after the Lothian Pension Fund said: “The Lothian Pension Fund policy is to take an active interest in environmental, social, and corporate governance issues and not be merely a passive investor. Class actions have a role in improving corporate governance.”
Lothian alleges that it and other investors were persuaded to buy the shares at an artificially inflated price ahead of a profits warning issued by Ericsson on 16 October 2007. The profits warning caused the shares to plunge. They have more than halved in value since then, falling from SKr24 (195p) to SKr 11.98 (97p).
The fund, which looks after the pensions of 67,000 local authority employees in West Lothian, Midlothian, East Lothian and the City of Edinburgh, had a total of £9.3 million invested in Ericsson shares in February to October 2007.
The value of Lothian’s shareholding crashed by £1.6m after the Swedish company issued a profits warning.
The suit has been filed by Edinburgh city council on behalf of the Lothian Pension Fund. Other parties in the class action include the Boston Retirement Board, Brussels-based Fortis Investment Management and Frankfurt-based Deka Investments.
This article was published in the Sunday Herald on 16 March 2008