O&M

Lawsuits allege Williams violated US securities laws

By the OGJ Online Staff

HOUSTON, Feb. 7, 2002 — Pipeline operator and energy trader Williams Cos. Inc., which recently delayed its 2001 fourth quarter and year-end financial statement, has been named in numerous lawsuits alleging violations of US securities laws.

On behalf of shareholders, the suits claim Williams, Tulsa, Okla., omitted certain information or disseminated information that was “materially false.” Williams said the lawsuits were without merit and the company will “vigorously defend ourselves.”

Rabin & Peckel LLP Thursday filed suit in the US District Court of the Northern District of Oklahoma on behalf of investors who bought Williams securities under a Jan. 7, 2002, equity offering. The complaint alleges the defendants violated securities laws by failing to “adequately disclose more than $2.4 billion in credit, support, and lease obligations” in a prospectus Williams filed in connection with the offering.

Williams extended credit support and guarantees to its former subsidiary Williams Communications Group Inc. (WCG) when it was spun off to shareholders in March 2001. Williams didn’t account for the obligations in earlier financial reports, the complaint alleges.

“Williams represented the contingent obligations as a ‘risk’ when at the time of the offering WCG could not meet its obligations, would default on its debt, and Williams would be responsible for $2.15 billion, plus $250 million in other expenses entirely omitted from the prospectus,” according to the complaint. The lawsuit seeks to be certified as a class action by the court and also to recover damages.

Williams’s common shares were hard hit in the weeks following the equity offering. The stock closed at $25 on Jan. 7 and has declined steadily to $15.32/share in Thursday mid-day trading on the New York Stock Exchange.

Williams delayed the release of its fourth quarter and year-end financial statements Jan. 29 and reported it was “reassessing” the impact of the $1.4 billion of contingent debt from Williams Communications.

The debt has ratings and share price triggers tied to Williams Communications’s share price and credit rating. The telecommunications industry has been under significant stress, including Global Crossing’s Chapter 11 Jan. 28 bankruptcy protection filing.

At least three other shareholder derivative lawsuits seeking class action status have been filed in US District Court for the Northern District of Oklahoma against Williams in the past week.