IBM Sued by Its Own Shareholder for Cooperating with the NSA

[Acidripp]

It seems as if those business which bowed down in front of NSA are now facing a backlash. That’s what we can see from several tech giants and business institutions who cooperated with the American National Security Agency (NSA) for its spying and surveillance project PRISM. These companies are now loosing billions of dollars and most importantly the trust of their customer for invading privacy.

Bloomberg Law - Document - Louisiana Sheriff's Pension & Relief Fund v. International Business Machines Corporation et al, Docket No. 1:13-cv-08818 (S.D.N.Y. Dec 12, 2013), Court Docket

One among those company is multinational technology and consulting corporation IBM, which has been sued and facing a massive lawsuit by its own shareholder for its collaboration with the NSA. The shareholder claims that by cooperating with NSA, IBM has abused federal securities laws to hide its looses.

BusinessWeek reports that the shareholder filed a complaint on Thursday in a federal district court in Manhattan where the Louisiana Sheriffs’ Pension and Relief Fund claims IBM defrauded investors by allegedly concealing a decline in hardware sales in China following reports in the Guardian about the NSA program:

Spying is not good for business. That’s been the message from many U.S. tech companies and industry groups in recent months following revelations last summer that several companies were cooperating with the National Security Agency over its Prism surveillance program. The industry says it stands to lose tens of billions of dollars as customers in other countries turn to homegrown technology instead.

Now one such company, IBM (IBM), is facing a lawsuit over its cooperation with the NSA. IBM was sued yesterday by a shareholder claiming it violated federal securities laws in seeking to hide losses that stemmed from disclosures of its relationship with the NSA.

In a complaint filed in federal district court in Manhattan on Thursday, the Louisiana Sheriffs’ Pension and Relief Fund claims IBM defrauded investors by allegedly concealing a decline in hardware sales in China following reports in the Guardian about the NSA program.

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“IBM knew that disclosures of the Prism scandal and IBM’s involvement in Cispa [the Cyber Intelligence Sharing and Protection Act] caused the Chinese government to abruptly halt its business with the Company, and that the Country forced businesses in China to stop contracting with IBM, leading to an immediate and precipitous decline in sales,”

the complaint states.

“As a result, the security and privacy breaches that IBM couched as potential risks had already materialized with drastic consequences for the Company’s business.”

The plaintiff alleges that IBM lobbied in favor of Cispa, a bill that would allow it to share customers’ personal data, including data from customers in China.

IBM’s cooperation with the NSA presented a “material risk” to the company’s sales, especially in China for its Systems and Technology hardware division, the pension fund says in the complaint.

“The company knew but misrepresented or concealed from investors that the disclosures of its lobbying and its association with the Prism and NSA spying scandal caused businesses in China as well as the Chinese government to abruptly halt doing business with IBM, leading to an immediate, and precipitous decline in sales.”

STORY: U.S. Tech Giants May Pay the Price, as Europe Seethes Over NSA Snooping

IBM reported in the Guardian a 22 percent drop in sales in China compared with the previous quarter as a result of disclosures about its relationship with the NSA last summer, the complaint says.

The lawsuit—brought as a class action representing all IBM shareholders who purchased common stock from June 25 to Oct. 16 of this year—is seeking compensatory damages for losses sustained as a result of IBM’s alleged wrongdoing, as well as lawyers’ fees and expenses, and other injunctive relief the court deems appropriate.

IBM spokesman Doug Shelton wrote in an e-mail:

“These allegations are ludicrous and irresponsible, and IBM will vigorously defend itself in court.”

However, IBM is not the first company to face lawsuit. Just a couple of days ago, a British citizen had sued Microsoft for cooperating with the NSA and providing personal details for PRISM project: A UK citizen has sued Microsoft for leaking Prism private data to the NSA – HackRead – Latest Cyber Crime – Information Security – Hacking News

SURSE:

IBM Shareholder Sues the Company Over NSA Cooperation - Businessweek

IBM Sued by Its Own Shareholder for Cooperating with the NSA – HackRead – Latest Cyber Crime – Information Security – Hacking News