Tellium Slapped With Class Action

Complaint alleges that Tellium issued 'materially false and misleading' information in connection with its IPO

December 26, 2002

3 Min Read

NEW YORK -- The law firm of Milberg Weiss Bershad Hynes & Lerach LLP announces that a class action lawsuit was filed on December 9, 2002, on behalf of purchasers of the securities of Tellium, Inc. ("Tellium" or the "Company") (Nasdaq:TELM - News) between May 17, 2001 and February 1, 2002, inclusive. A copy of the complaint filed in this action is available from the Court, or can be viewed on Milberg Weiss' website at: http://www.milberg.com/cases/tellium/ The action is pending in the United States District Court, District of New Jersey, located at Martin Luther King, Jr. Federal Building and U.S. Courthouse, 50 Walnut Street, Newark, New Jersey 07101, against defendants Tellium, Harry J. Carr, Michael J. Losch, Richard W. Barcus, Michael M. Connors, William B. Bunting, Jeffrey A. Feldman, Edward F. Glassmeyer, Richard C. Smith, Jr., William A. Roper, Jr. and Morgan Stanley Dean Witter. The Complaint alleges that defendants violated Sections 11 and 15 of the Securities Act of 1933 by issuing a materially false and misleading Prospectus and Registration Statement (the "Prospectus") in connection with the Company's initial public offering ("IPO") and violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by making material misrepresentations to the market between May 17, 2001 and February 1, 2002. Specifically, in the Prospectus, defendants stated that the Company had entered into an agreement to provide switches to Qwest Communications International, Inc. ("Qwest"), which provided for minimum purchase commitments of $300 million. As alleged in the complaint, these statements were materially false and misleading because they failed to disclose the following adverse facts, among others: (i) that Qwest neither needed nor wanted Tellium's switches but had entered into the agreement only because Tellium was giving "friends and family" stock to officers of Qwest; (ii) the number of switches envisioned by the agreement was much larger than Qwest would need and represented some 200 switches, which by far exceeded the number of sites Qwest had; and (iii) in fact, Qwest had no solid minimum commitments and could terminate the agreement with relative ease. Following the IPO, the top officers and directors of Tellium continued to make statements that an agreement to provide switches to Qwest was a great victory and Qwest had minimum purchase commitments of $300 million. As alleged in the complaint, Qwest had entered into the agreement only because Tellium gave "friends and family" shares of Tellium stock to Qwest executives in exchange for the agreement. Moreover, Qwest did not need or want the switches and never used them. In late 2001, Tellium's stock declined as Qwest's agreement with Tellium was modified to give Qwest flexibility to terminate the agreement. While the so-called minimum commitment of the contract was increased, this was illusory as it depended on many contingencies and Qwest could easily cancel the agreement. Nonetheless, defendants assured the market that this was a positive event. Then, on February 1, 2002, the last day of the Class Period, Tellium admitted that its 2002 results would be much worse than the Company had been representing during the Class Period. On this news, Tellium's stock declined to as low as $2-55/64 on volume of 10.9 million shares, some 90% below the Class Period high of $29-47/64.

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