Frontier Communications Corp. has been hit with its second prospective class action lawsuit this month alleging the company made misleading statements on its February 2015 acquisition of Verizon operations in three states.
The latest federal securities class action, filed Thursday in U.S. District Court in Hartford, claims the Norwalk-based company made materially false and misleading statements regarding the company’s business, operational and compliance policies. The prospective class, filed on behalf of Lisa Morrow, a Washington state resident, would cover anyone who obtained Frontier securities between Feb. 6, 2015, and May 2, 2017.
The lawsuit states top Frontier executives were not upfront, honest and forthright early on that acquiring nonpaying accounts as part of the acquisition could negatively affect shareholders. Specifically, the lawsuit contends, Frontier officials deliberately omitted material information that its shareholders should have known about.
The first lawsuit was filed earlier this month in U.S. District Court in Connecticut and includes similar allegations against Frontier. That lawsuit, though, only covers people who obtained Frontier securities between April 1, 2016, and May 2, 2017.
The acquisition of Verizon’s wireline operations in California, Florida and Texas was for $10.54 billion in cash and assumed debt. The wireline operations provide services for broadband, video and voice services to residential, commercial and wholesale customers.
The lawsuit points to several statements by top Frontier executives which painted a rosy picture of the deal after the acquisition. They included comments made Dan McCarthy, Frontier’s president and chief operating officer, nearly two weeks after the deal. “This represents a phenomenal opportunity for our employees to take on new challenges and we are confident that this transaction will be very rewarding for our shareholders too,” McCarthy said, according to the newest lawsuit.
The suit alleges violations of the federal securities laws and the Securities Exchange Act of 1934.
As a result of acquiring the nonpaying accounts, the lawsuit claims the company will be required to increase its reserves and write-off amounts from accounts receivable.
“As a result of defendant’s wrongful acts and omissions, and the precipitous decline in the market value of the company’s securities, plaintiff and other class members have suffered significant losses and damages,” according to the suit. The lawsuit doesn’t state how much money Morrow or the class lost.
The lawsuit claims Frontier engaged in a “plan, scheme and conspiracy” to engage in fraudulent, deceitful and misleading comments and statements about the nonpaying accounts.
The suit continues: “As a result of the dissemination of false and misleading reports, releases and public statements, the market price of Frontier securities was artificially inflated throughout the class period.”
The company lost $80 million in the first quarter of 2016, and $75 million in the first quarter of 2017, according to the lawsuit.
The suit seeks to award plaintiffs and other members of the class prejudgment and postjudgment interest and attorney fees.
In an emailed statement Friday, Mark Nielsen, executive vice president and chief legal officer for Frontier, wrote: “The claims made in these complaints are totally unfounded and have no legal merit whatsoever. We will defend ourselves vigorously.”
Morrow is represented by Shannon Hopkins, of Levi & Korsinsky in Stamford. Hopkins did not respond to a request for comment Friday.
The case is before U.S. District Judge Michael Shea.