The dominoes continue to fall in what seems to be a cascading effect of the information exposed by former National Security Agency (NSA) contractor Edward Snowden. The latest twist involves a lawsuit against IBM filed by its shareholders. According to Louisiana Sheriffs' Pension and Relief Fund, the company did not disclose that its sales have been declining in China, which resulted in its market value dropping by over $12 billion.
The pension fund's lawsuit filed in New York City stems from the cooperation of IBM with the NSA to protect its intellectual property rights. The company supported a bill that will allow it to share personal data of its customers including those in China.
Following the PRISM revelations, buyers in China, including the government, were reluctant, if at all interested, to deal with IBM in fear that their security will be compromised. IBM posted a drop of as much as 22 percent in China as well as 40 percent kink in hardware sales for the third quarter of the year. While the company's profit increased to six percent during the said period, it fell below expectations with revenues that fell to four percent.
The pension fund based in Baton Rouge listed Virginia Rometty and Mark Loughridge, IBM chief executive and chief financial officer, respective, as respondents to the case. The group supports active and retired employees of the sheriffs' office in the state. It aims to represent and seek damages for investors who acquired IBM stocks between June 25 and October 16.
On Friday, IBM released a statement upon learning of the lawsuit.
"This lawsuit seeks to confuse IBM's support for a U.S. cybersecurity legislative proposal -- which has yet to be enacted -- with the completely unrelated NSA surveillance program called PRISM. Even a cursory reading of the legislative proposal, known as CISPA [Cyber Intelligence Sharing and Protection Act], makes clear that it has nothing to do with the recently disclosed NSA surveillance program...This bill does not refer to China, and it does not authorize government surveillance, facts that the plaintiff and its attorneys could have easily determined had they bothered to do the slightest fact checking," IBM's media relation officer Doug Shelton said in a press statement.
"Starting from this fictitious connection between CISPA and PRISM, the complaint proceeds to make numerous specious and false accusations...IBM will vigorously fight this baseless lawsuit," Shelton added.
Louisiana Sheriffs' Pension and Relief Fund is represented by the law firm Bernstein, Litowitz, Berger & Grossmann, a well-known specialist in class-action suits.
Shares of IBM closed up 2.92 percent at $177.85 on the NYSE on Monday.