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On the same day the glitzy Harman Center for the Arts celebrated its grand opening in Washington (a must-attend for the city’s high society), Sidney Harman, the center’s namesake and a well-known purveyor of high-end audio equipment, was sued in federal court. The suit was filed last week by a group of stockholders who say Harman lied about the health of his company to push through a merger that could have heaped more than $400 million in his lap. Was the timing serendipity? “No connection,” says Cohen, Milstein, Hausfeld & Toll name partner Steven Toll, who is representing the lead plaintiff in the suit. The class action alleges that Harman, 89, founder and chairman of Harman International Industries Inc., and two financial officers concealed evidence of the company’s waning business to protect an $8 billion buyout, according to the complaint filed in the U.S. District Court for the District of Columbia on Oct. 1. The prospective buyers, private equity firm Kohlberg Kravis Roberts and Goldman Sachs, walked away from the merger last month, citing a “material adverse change” to Harman’s business. After the deal fell through, the company’s stock prices plunged nearly 30 percent. Harman, who holds 3.5 million shares in the company, stood to gain about $420 million in the deal, according to the complaint. “Clearly, the deal that they had before them was motivation to not disclose the adverse conditions,” Toll says. Harman could not be reached for comment, but in statements following the merger’s bust, the company vehemently disagreed with the notion that its business was suffering.
Joe Palazzolo can be contacted at [email protected].

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