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US: Judge Orders Lucent to Pay $224 Million

The Associtaed Press
December 23rd, 2005

A federal bankruptcy judge has ruled that Lucent Technologies must pay $224 million, plus other costs, to the creditors of Winstar Communications.

The judge found that Lucent induced the company, which is now defunct, to purchase unneeded telecommunication equipment.

Lucent said on Thursday that it would appeal the ruling but would take a $300 million charge in its first quarter, which ends Dec. 31.

Lucent, which is based in Murray Hill, N.J., did not say how the charge would affect earnings. Its shares fell 2 cents, or about 0.7 percent, and closed at $2.77 in trading Thursday on the New York Stock Exchange. Lucent has traded from $2.35 to $3.86 over the last year.

The ruling was issued Wednesday by Judge Joel B. Rosenthal of the United States Bankruptcy Court in Wilmington, Del. He found that "Lucent engaged in inequitable conduct by using Winstar as a mere instrumentality to inflate Lucent's own revenues." Both companies are incorporated in Delaware.

"What became apparent as the evidence unfolded was that what began as a 'strategic partnership' to benefit both parties quickly degenerated into a relationship in which the much larger company bullied and threatened the smaller into taking actions that were designed to benefit the larger at the expense of the smaller," Judge Rosenthal wrote.

It has not yet been determined how the proceeds of the award, which will total about $300 million with interest and other costs, will be divided among Winstar's creditors, said Stephen M. Rathkopf, a lawyer for Winstar's bankruptcy trustee. In a statement, the Lucent general counsel, William R. Carapezzi, said: "We have made strong arguments supporting our view that this suit was without merit. We are examining the judge's ruling very carefully and will vigorously appeal the decision."

Winstar, which had been based in Herndon, Va., filed for Chapter 11 bankruptcy protection in Wilmington, Del., seeking to reorganize, in April 2001. It also sued Lucent that month, seeking damages of $10 billion, charging that a Lucent breach of contract caused it to file for bankruptcy.



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