Lumen Hid Its Toxic Lead Cable Culpability From Public, Alleges Class Action
Numerous media disclosures between July 9 and July 14 that Lumen Technologies had culpability for failing to remove the toxic lead cables it inherited decades ago from the Bell system sent the stock tumbling more than 22%, alleged plaintiff John McLemore’s securities fraud class action Friday (docket 3:23-cv-01290) in U.S. District Court for Western Louisiana in Monroe. McLemore alleges on behalf of himself and his proposed class that he bought Lumen shares at “artificially inflated prices,” and was “damaged upon the revelation of the alleged corrective disclosures.”
Plaintiff McLemore in his class action against Lumen isn't using the same lawyer who filed separate securities fraud class actions against AT&T and Verizon days apart in late July and early August for their alleged failure to disclose that their telecom cables were covered with toxic lead (see 2308020046). Verizon additionally faces two class actions from current and former Comcast utility workers who are suing to force Verizon to pay for their medical monitoring because for years, they said, they had to handle Verizon’s lead cables when climbing to reach Comcast equipment on the same utility poles (see 2309120068).
McLemore alleges Lumen, its CEO Kate Johnson, Chief Financial Officer Chris Stansbury, former CEO Jeffrey Storey and former CFO Indraneel Dev “made materially false and misleading statements” about the company’s business, operations and compliance policies. The defendants “specifically” failed to disclose that Lumen owned and still owns “thousands of miles of cables wrapped in lead, a known neurotoxin,” said the class action. Those cables harmed “and posed the risk of further harming the environment,” it said. The cables also pose “a significant public health risk and environmental pollution risk,” it said. Lumen doesn't comment on pending litigation, emailed a spokesperson Monday.
Lumen was “on notice” about the damage and risks posed by its lead-covered cables but didn’t disclose them as a potential threat “to everyday people and communities,” said the complaint. The company also failed “to provide adequate lead training to employees,” it said. Lumen’s inaction subjected the company “to a heightened risk of governmental and regulatory oversight and enforcement action,” plus “legal and reputational harm,” it said. Lumen’s public statements “were materially false and misleading at all relevant times,” it said.
On an Aug. 1 quarterly earnings call, Lumen’s senior management disclosed for the first time that the company had spent “considerable time” determining how much lead was in its network of 35,000 miles of telecom cables but couldn’t estimate the “potential remediation costs,” said the complaint. Due to the “wrongful acts and omissions” of Lumen and its current and former senior executives, and the “precipitous decline in the market value” of the company’s stock, plaintiff McLemore and his potential class members “suffered significant losses and damages,” it said.
McLemore’s class period begins in March 2019 when Lumen’s annual report for calendar 2018 discussed its telecom cable network as encompassing 910,000 miles of “copper plant,” without disclosing what percentage of that copper cable network contained lead, said the complaint. The annual report also “downplayed Lumen’s risks related to environmental matters,” while simultaneously touting its environmental, safety and health compliance activities, it said.
The company’s silence about its lead culpability extended into its 2022 annual report, released Feb. 23, said the complaint. The report continued to “downplay” Lumen’s risks “related to environmental matters,” while failing to address its ownership of lead-covered cables and the “attendant risks of owning and/or failing to remove” those cables, it said.