Suit Seeks to Hold Vestberg, 14 Board Members Liable for Verizon’s Lead Cables
A new shareholder derivative action seeks to hold Verizon, CEO Hans Vestberg, former Chief Financial Officer Matthew Ellis and 14 current and former board members accountable for Verizon’s “long-standing decision to bury and leave toxic telephone cables around the country indefinitely to contaminate ground water and pose other potential health risks to the public from exposure to these wires.” The complaint was filed Wednesday in U.S. District Court for New Jersey in Trenton.
Between Verizon’s exposure to fines, penalties, remedial work and government investigations, Verizon is subject to hundreds of millions of dollars, if not billions, “in potential damages,” said plaintiff Courtney Moore’s complaint (docket 3:23-cv-23071). From 2018 until 2023, Verizon swept the lead cables “under the rug,” concealing them from the investing public “in violation of its disclosure obligations and fiduciary duties,” it said.
Multiple shareholder lawsuits have cropped up in recent months against Verizon, AT&T and other carriers, stemming from a series of lead cable exposes that The Wall Street Journal published in July (see 2308020046). There also have been at least two class actions filed by current and former Comcast utility pole workers seeking Verizon-funded medical monitoring for years of exposure to Verizon’s lead cables (see 2309120068). And on Tuesday, one of the first known homeowner suits was removed to federal court in Louisiana, seeking to hold the major telecom companies liable for lead cables that damaged their property values (see 2312140001)
Moore’s action seeks to recover “substantial damages” for violations of securities laws “attributable to these buried wires and their nondisclosure” for a class of shareholders who bought Verizon stock between October 2018 and July 26 of this year, said the complaint. Over this “protracted” five-year class period covering ongoing federal securities law violations, Verizon filed several 10-Q and 10-K reports with the SEC “attesting to the accuracy” of its financial statements, it said: “These attestations failed to disclose Verizon’s exposure to the buried lead cables scandal.”
As senior executive officers and directors of a publicly traded company, the individual defendants “had a duty to prevent and not to effect the dissemination of inaccurate and untruthful information,” said the complaint. They also “had a duty” to cause Verizon “to disclose omissions of material fact in its regulatory filings with the SEC,” but they failed to do so, it said.
A majority of Verizon board members can’t consider a demand to “commence litigation against themselves” on behalf of the company with “the requisite level of disinterestedness and independence,” said the complaint. That’s because there’s a “substantial likelihood” that a majority of Verizon’s current directors “are personally liable” in this derivative action “for unexculpated breaches of fiduciary duty and securities laws violations,” it said.
Each Verizon director and officer owes to Verizon and its shareholders “the fiduciary duty to exercise good faith and diligence” in the administration of the company “and in the use and preservation of its property and assets and the highest obligations of fair dealing,” said the complaint. The individual defendants, because of their positions of control and authority, “were able to and did, directly and/or indirectly, exercise control over the wrongful acts complained of,” it said.
To “discharge their duties,” the Verizon officers and directors “were required to exercise reasonable and prudent supervision over the management, policies, controls, and operations” of the company, said the complaint. The conduct of the individual defendants “involves a knowing and culpable violation of their obligations as directors and officers of Verizon, the absence of good faith on their part, or a reckless disregard for their duties,” it said.