Dutch investors want
probe, damages at KPNQwest
AOL News (Reuters)
Tuesday, August 23, 2005
AMSTERDAM, Aug 23 (Reuters) - The Dutch VEB association of investors said on Tuesday it had requested a judicial probe into mismanagement at failed telecoms operator KPNQwest in preparation of damages claims.
KPNQwest, a wholesale telecoms joint venture for large corporate customers between telecoms carriers Qwest from the United States and KPN in the Netherlands, was listed in 1999 but tumbled into bankruptcy in 2002 after the bursting of the Internet, telecoms and technology bubble.
The VEB association of mostly small Dutch investors said it had started proceedings to group together shareholders of the failed venture after what the VEB said were overly optimistic forecasts and dubious financial transactions.
"We expect a procedure for damages claims to follow after the probe, or possibly even earlier than that," said VEB director Peter-Paul de Vries.
KPNQwest's former management, Qwest and KPN would all be targeted for damages, he added. Qwest and KPN remained major shareholders after the listing and used it to sell their own services. Both firms had non-executive directors on the board.
A KPN spokesman said the company would follow the proceedings, but declined to comment further.
KPNQwest once had a market capitalization of 42 billion euros ($51.4 billion) and its fibre-optic network served as Europe's key Internet backbone. But after the collapse, its clients were quickly picked up by competitors.
In order for the corporate court in Amsterdam to order a probe into possible mismanagement, VEB needs to prove that there are reasonable doubts about how KPNQwest was managed.
"We have a rock solid case. I'll eat my hat if the probe is not granted," De Vries said.
VEB listed several points where it argued KPNQwest had misled investors: the company said its cash position was stronger than it really was, its sales and profit forecasts were overly optimistic, long-term revenues were recognized in one quarter and financial reporting was inadequate.
VEB said the case was only now being brought to court, because of legal details and the fact that it only recently emerged that KPNQwest's administrators would not publish the results of their investigation.
Qwest, but not KPN, is already being targeted in a separate KPNQwest judicial procedure in the United States.
VEB has requested and won approval to survey possible mismanagement at many other firms, including Dutch retail group Ahold.
Reporting by Lucas van Grinsven
European Technology Correspondent
Editing by Joe Ortiz
Telephone: +31 20 504 5019))
08/23/05 08:32 ET