On October 4, 2017, a group of Frontier Communications Corp. investors filed putative class claims against the communications services provider in Connecticut federal court. Plaintiffs allege that Frontier violated securities law when it failed to disclose the financial impact of a large number of unpaid user accounts taken on by the company after its $10.5 billon acquisition of Verizon Inc. wire line operations in California, Texas and Florida.
In the complaint, named plaintiff Larisa Rozenberg claims that Frontier consciously chose not to disclose the unpaid accounts to investors after the April 2016 acquisition, then intentionally and artificially raised the selling price for company securities. Once the company eventually disclosed the existence of the accounts in early 2017, there began a steady decline in the market value of the company’s stock. On February 27, 2017, Frontier publically stated that the company had suffered an $80 million net loss in the fourth quarter of 2016, the cause of which was blamed on the nonpaying accounts. Accordingly, the company stock price dropped 11% on February 27 to close at $2.93 per share.
Plaintiffs claim that Frontier financial officer, Ralph Perley McBride, admitted in a subsequent February 27, 2017 phone conference on the company’s financial state that neither Verizon nor Frontier had taken steps to remediate the unpaid accounts from February 2016 to August 2016. On May 2, 2017, Frontier again publically disclosed yet another loss of $16 million. The announcement caused stock prices to drop another 16%, closing out at $1.61 per share on May 3, 2017. Plaintiffs argue that Frontier had been aware of the delinquent accounts since it announced the Verizon acquisition in early 2015 and yet took no steps to disclose the information to shareholders. The class seeks damages including pre-judgment and post-judgment interest in addition to attorney fees and other costs.
The case is: Rozenberg v. Frontier Communications Corp., et al., Case No.: 3:17-cv-01672, in the U.S. District Court for the District of Connecticut.
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