An International Business Machines Corp (IBM) shareholder has sued the company over claims that its cooperation with a US National Security Agency (NSA) eavesdropping program caused a drop in sales in China, hurting investors.
In a complaint filed on Friday at a Manhattan federal court, the Louisiana Sheriffs’ Pension and Relief Fund accuses IBM of defrauding investors by concealing that sales slowed after former contractor Edward Snowden disclosed that the firm was cooperating with the intelligence agency.
In June, documents released by Snowden revealed the agency’s PRISM program, which used information from technology companies such as IBM, the pension fund said. The firm also lobbied in favor of a bill that would allow it to share customers’ personal data, including data from users in China, along with the agency, according to the complaint.
“The company knew, but misrepresented or concealed from investors that the disclosures of its lobbying and its association with the PRISM and NSA spying scandal caused businesses in China, as well as the Chinese government, to abruptly halt doing business with IBM, leading to an immediate and precipitous decline in sales,” the fund said in its complaint.
On Oct. 16, IBM, the world’s largest computer services provider, posted a 22 percent quarterly drop in its China sales as a result of the Snowden disclosures, according to the Louisiana fund, which said it pays retirement, death and disability benefits to more than 20,000 active and retired employees of sheriff’s offices throughout the state.
The suit is “pushing a wild conspiracy theory,” IBM’s general counsel, Robert Weber, said in a statement yesterday.
“This lawsuit seeks to confuse IBM’s support for a US cybersecurity legislative proposal — which has yet to be enacted — with the completely unrelated NSA surveillance program called PRISM,” Weber said in the statement. “Even a cursory reading of the legislative proposal, known as CISPA, makes clear that it has nothing to do with the recently disclosed NSA surveillance program.”
The pension fund is seeking to represent a class of investors who bought IBM stock from June 25 to Oct. 16.