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Asian technology companies once put their faith in the power of U.S. investors. Now they’re getting more than they bargained for: class-action lawsuits from shareholders. In the past two months, class action petitions have been filed against two Asian companies listed on the Nasdaq: data-center builder iAsiaworks and popular Indian portal Rediff. More could be on the way. In the aftermath of the IPO craze, U.S. law firms such as New York’s Milberg Weiss have raced to sue companies under the class action statute. Asian firms that listed on U.S. exchanges — the Nasdaq held particular cachet for tech companies eager to show they were global contenders — now find their bid for prestige has subjected them to a new level of accountability. In late March, iAsiaworks shareholder Marek Kiyashka filed a petition for class action status in New York, accusing the company of understating its capital needs in a prospectus given to investors before its August 2000 initial public offering. iAsiaworks has received substantial backing from Newbridge Capital, Hambrecht & Quist and Goldman Sachs. The Net services firm says the lawsuit is without merit. But since March 23, when the suit was filed, iAsiaworks lost a key deal with undersea cable company Flag, replaced its CEO and watched its stock price plunge from $2.88 to 95 cents. At the end of April, Rediff was named in a petition that charges it failed to reveal problems with its e-mail software and to disclose that key advertising contracts were due to end six months after its IPO. Underwriters Goldman Sachs, Credit Suisse First Boston and Robert Fleming were named as well. The petition also claimed Rediff misled investors about one of its company directors, Richard Li, chairman of Pacific Century Cyberworks. Last month, Li admitted he hadn’t graduated from Stanford University, as he had long asserted, after the International Herald Tribune questioned his academic background. Rediff claims the complaint is without merit. But Li’s phantom degree may come back to haunt Pacific Century Cyberworks. The company is based in Hong Kong, but it also lists American Depositary Receipts on the New York Stock Exchange, and some U.S. investors are already talking of suing the company. Pacific Century’s stock price has sunk from $20 a share in August to $4 last week. The suits are a revelation for investors in Asia, where litigation by aggrieved small investors is almost unheard of. So far, Asian bankers don’t seem too worried. These class action petitioners are mere “hecklers,” they say. And even if they win, they’ll lose: The bankers argue that plaintiffs are unlikely to collect on a U.S. judgment because there are no laws in Asia holding those companies accountable. Related Articles from The Industry Standard: Bad Vibes From Good Times The Lawyers Want a Piece, Too Investors Seize the Momentum Copyright � 2001 The Industry Standard

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