Cisco Settlement Leaves One Live Suit

Cisco Systems agreed to pay $91.8 million to make a
headache go away, but it doesn’t mark the end of
Cisco’s legal woes.

The headache was a suit, filed April 20, 2001, claiming Cisco, as well as current
and former officers and directors, made misleading statements, or omitted
statements of material fact that were relied on by purchasers of Cisco

It also alleged that the individual defendants sold Cisco stock while in
possession of material, non-public information.

According to Mark Chandler, senior vice president and general counsel for
Cisco, the company was confident that it would win, but decided to settle
rather than go through the disruption and expense associated with fighting a
protracted legal battle.

Cisco nonetheless denied all allegations in the suit.

Cisco said this settlement will have no material impact on its financial
position or results of operations because the cost will be covered by its
insurance policies.

“Cisco continues to firmly believe that the suit’s claims are without merit,
and we have been eager to achieve a victory in this case,” said Chandler in
a statement.

Shareholders accepted the settlement, their lawyer said, because the SEC had
not charged the company with wrongdoing, making it harder for them to prove
that they were misled.

“Though not required to prove securities fraud, there was a lack of insider
trading, and Cisco was not required to make a financial restatement,” said
Spencer Burkholz, lead lawyer for Lerach, Coughlin, Stoia, Gellar, Rudman
and Robbins LLP, counsel for the plaintiffs.

The agreement is subject to final documentation and court approval.

recovery, less fees and expenses will be distributed to purchasers of Cisco
common stock between November 10, 1999, and February 6, 2001, who file valid
proofs of claim under procedures to be implemented by the United States
District Court for the Northern District of California, which is
overseeing the litigation.

However, Cisco remains on a short legal leash.

The San Jose, Calif.-based networking equipment maker has another lawsuit
staring it in the face in connection with the timing of option grants and
compensation to officers and directors.

According to its most recent filing with SEC, a suit was filed on February
16, 2005.

That lawsuit includes claims for breach of fiduciary duty, unjust
enrichment, constructive trust and violations of the California Corporations

Plaintiffs allege wrongdoing in connection with option grants and
compensation to officers and directors, the timing of option grants, and the
stock repurchase program.

They’re seeking unspecified compensation and other
damages, rescission of options and other relief.

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