Newdorf Legal Announces Federal Judge Allows Investor Lawsuit to Proceed Against Investcorp; Shareholders Allege Collusion Led to Merger Losses.
PORTLAND, Ore., Nov. 4, 2014 /PRNewswire/ -- A ruling by a federal judge permits a shareholder lawsuit to proceed against Investcorp (BSE: INVCORP), an international private equity firm, and against a telecommunications company. Judge Michael W. Mosman made the ruling in Kentrox, Inc. v. Bernstein, No. 3:13-cv-01492-ST, in the U.S. District Court for the District of Oregon.
The lawsuit by eight minority shareholders alleges breaches of fiduciary duty and other misconduct related to the 2013 acquisition of Kentrox, Inc. by Westell Technologies, Inc. (NASDAQ: WSTL). Investcorp was the majority shareholder of Kentrox.
The federal court ruling on October 29, 2014, denied a motion to dismiss the investors' lawsuit. Judge Mosman affirmed in large part a magistrate judge's ruling issued May 9, 2014. As stated in the magistrate judge's ruling, the lawsuit alleges that the Minority Shareholders were informed by a letter dated March 19, 2013, that Kentrox was being sold on April 1, 2013, for $30 million. They were further informed that as part of the merger Investcorp had forced the conversion of all preferred shares to common stock. As a result of that conversion, Kentrox asserted it was not required to pay any liquidation preference to the Minority Shareholders. The Minority Shareholders received less than 14 cents per share – instead of the $6.54 per share they had been led to expect – and lost 97% of their original investment.
The minority investors contend in their lawsuit that Investcorp colluded with the Chief Executive Officer of Kentrox to provide millions of dollars in financial benefits to Kentrox executive management at the expense of the Minority Shareholders.
"The minority investors maintain that their trust was abused," said David Newdorf, attorney for the investors. "As the lawsuit states, the Minority Shareholders knew the risk of investing in a privately held company. They knew that they could lose their money if the Company failed. What they never expected was that their investment might be wiped out even though the Company was successful. And Kentrox was a thriving company at the time of the merger."
As a result of the court ruling, pre-trial discovery will proceed on the lawsuit.
Investcorp is a provider and manager of alternative investment products and is publicly traded on the Bahrain Bourse (Bahrain Stock Exchange: INVCORP). The Investcorp Group has offices in New York, London, the Kingdom of Bahrain, the Kingdom of Saudi Arabia and Abu Dhabi.
Westell Technologies, Inc. (NASDAQ: WSTL),is a provider of telecommunications equipment for wireline, wireless and home networks. Headquartered in Aurora, Illinois, Westell designs and distributes a range of carrier-class communications equipment.
David Newdorf is managing attorney of San Francisco-based Newdorf Legal. Mr. Newdorf has successfully prosecuted investor, fraud and contract claims on behalf of individuals, businesses and public entities. More information may be found at www.newdorflegal.com.
SOURCE Newdorf Legal
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