Second Class Action Alleges Verizon Covered Up Toxicity of Lead Cables

Verizon, CEO Hans Vestberg and former Chief Financial Officer Matt Ellis failed to disclose the company was responsible for “an extensive network of lead cables that had been previously laid in many areas around the country, causing harm and posing the risk of further harm to the environment,” alleged a Verizon shareholder.

The General Retirement System of the city of Detroit, filed a fraud class action Friday (docket 3:23-cv-05218) in U.S. District Court for New Jersey in Trenton on behalf of itself and all others owning Verizon stock between October 2018 and July 26. Ellis left his CFO role May 1. Tony Skiadas, his successor, isn’t named in the lawsuit. July 26 was the day before Verizon released its 10-Q report for Q1 ended March 31. It was the last quarterly report prepared under Ellis’ watch.

It's the summer’s second known class action filed against Verizon on similar grounds, plus the additional complaint against AT&T (see 2308020046). Though there was some commonality among the attorneys representing the plaintiffs in both the earlier Verizon and AT&T class actions, the Detroit shareholder is represented by Lawrence Levit of Abraham Fruchter and Michael VanOverbeke of VanOverbeke Michaud, neither of whom are involved in the earlier cases.

The spark for all three lawsuits was a July 9 Wall Street Journal story based on an investigation in which WSJ reporters collected about 200 environmental samples from 130 cable sites they visited, finding about 80% of sediment samples taken next to underwater cables showed elevated levels of lead. The revelations caused Verizon’s stock to fall 2.1% on “unusually heavy trading volume” the next trading day, “damaging investors,” said the Detroit shareholder class action.

A follow-up story July 17 in which the WSJ reported that three environmental groups asked the EPA to shield the public from the release of lead from cables left behind by telecom companies, sent Verizon shares dropping another 7.5%, it said.

Between July 7, the last trading day before the WSJ expose was published, and the close of trading July 17, Verizon shares plunged 12.3%, it said. Due to the defendants’ “wrongful acts and omissions,” and the “precipitous decline” in the market value of Verizon’s common shares, the plaintiff and its proposed class members “suffered significant losses and damages,” it said.

The lawsuit cites various Verizon disclosures since Q3 in 2018, culminating in its 10-Q report for Q1 2023, all containing statements that “were materially false and misleading.” At the time those statements were made, many of the “legacy copper cables” that Verizon had “abandoned” were found to be “covered in lead,” said the class action. The lead, a “known neurotoxin,” was “harming and posed further risk of harm to the environment,” Verizon employees and the public, it said.

Between October 2018 and late July, Verizon, Vestberg and Ellis “made false and misleading statements,” and failed to disclose that Verizon “was responsible for cables around the country that are highly toxic due to their being wrapped in lead,” said the class action. They also failed to disclose that Verizon “faces potentially significant litigation risk, regulatory risk, and reputational harm as a result of its responsibility for these lead-covered cables and the health risks stemming from their presence” around the U.S., it said.

Verizon, Vestberg and Ellis were given warnings “about the damage and risks presented by these cables but did not disclose them as a potential threat to employee safety or to everyday people and communities,” alleged the complaint. Verizon didn’t comment Monday.