Seagate reaches $175mln deal in shareholder fraud case over Huawei drives sales

CALIFORNIA: Seagate Technology has reached a $175 million deal to settle a shareholder fraud case over alleged undisclosed sales of hard disk drives to China’s Huawei Technologies.

A preliminary agreement in the proposed class-action lawsuit against Seagate, CEO Dave Mosley, and CFO Gianluca Romano was filed late Friday in a San Francisco federal court. The settlement still requires approval from a judge.

Shareholders, including pension funds from Arkansas, Mississippi, Germany, and Luxembourg, accused Seagate of misleading investors by failing to disclose the sale of more than 7.4 million hard disk drives to Huawei, valued at over $1.1 billion. They said this helped inflate the company’s profits and share price.

Seagate has denied any wrongdoing but agreed to settle the case. The dispute is linked to earlier enforcement action, including a $300 million penalty imposed by the US Department of Commerce’s Bureau of Industry and Security in April 2023, the largest civil penalty in the agency’s history not tied to a criminal case.

The company has already set aside $105 million for the settlement, while insurers are expected to cover about $70 million. The class period runs from September 14, 2020, to April 19, 2023.

Seagate is based in Singapore and incorporated in Ireland, with significant operations in Fremont, California. Huawei, headquartered in Shenzhen, operates in more than 170 countries and employs around 213,000 people.

The US placed Huawei on a trade blacklist in 2019 over national security concerns and later tightened restrictions on exports involving US technology. Huawei has denied being a security threat.

Lawyers representing shareholders are expected to seek up to 25 per cent of the settlement fund in legal fees.