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In October 1997, The Boeing Co. announced that it was taking a $2.6 billion charge related to production problems. Boeing had attempted to increase its production — to 400 planes in 1997 from 235 in 1996 — but it couldn’t manage it, according to plaintiffs’ attorney Steve Berman. “They ran out of parts and had to stop production on two lines” that were building 747s and 737s, causing the aircraft maker to miss delivery dates on planes that had been ordered, he said. “Boeing should have told people in April 1997 of the extent of the production problems,” Berman said. Instead, it announced on July 21, 1997, that its quarterly earnings were “in line with analysts’ expectations” and its executives made “positive statements” about production. When Boeing announced the $2.6 billion charge on Oct. 22 of that year, the unexpected news caused the stock to drop from about $53 to $49 per share. It eventually fell to the high $30s. Immediately after the announcement, Boeing shareholders sued the company and its top executives, charging securities fraud and violation of the Washington Consumer Protection Act. Certified as a class in May 2000, the plaintiffs contended that the defendants had concealed production problems to inflate the price of the stock. The plaintiffs took 256 depositions to establish discrepancies between the company’s public statements and what its executives and employees knew. “We had to depose everyone who knew what was going on in production and in financial,” Berman said. The lawsuit was scheduled for trial in March 2002, but settled after 24 hours of mediation over two days. While Boeing agreed to pay $92.5 million, it stated in a press release that it “continue[s] to believe that plaintiffs’ claims are without merit” and that it settled only “to eliminate the risks, expense and disruption of continuing litigation.” Attorneys’ fees, still to be been determined, will come out of the $92.5 million, Berman said. Plaintiffs’ attorneys: Steve Berman and Clyde Platt of Hagens Berman in Seattle. Defense attorneys: Bruce Vanyo of Wilson Sonsini Goodrich & Rosati in Palo Alto, Calif., and Barry Kaplan of Perkins Coie in Seattle.

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