Pensioners withdraw lawsuit against IBM over China sales

The fund said IBM had failed to warn investors of slowing sales in China after disclosures of its alleged role in a NSA program

A pension and relief fund that sued IBM for failing to warn investors of loss of business in China because of its alleged involvement with spying by the U.S. National Security Agency has voluntarily withdrawn the lawsuit in a New York court.

The Louisiana Sheriffs' Pension and Relief Fund has decided to voluntarily dismiss the action after additional investigation into the matters alleged, which included investigations in the U.S. and China and discussions with the defense counsel, John C. Browne, lawyer for the fund, wrote to the court in a letter disclosed Monday.

"We said the complaint proceeded to make numerous specious and false accusations, and IBM called upon the law firm that filed this action to do the right thing and dismiss it. We are pleased that they have done the right thing," IBM spokesman Doug Shelton wrote in an emailed statement.

In a December lawsuit in the U.S. District Court for the Southern District of New York, Louisiana Sheriffs' Pension and Relief Fund claimed that IBM failed to inform investors that sales in China would slow after disclosures that IBM was allegedly cooperating with a NSA spying program.

Robert C. Weber, IBM's senior vice president and general counsel, said at the time the suit was "pushing a wild conspiracy theory," and called on the law firm filing the suit to do the right thing and withdraw the action as the complaint made numerous "specious and false accusations." IBM had attributed a drop in hardware sales in the third quarter partly to delayed procurement by Chinese government agencies while the local government framed a new economic policy.

IBM knew that the Chinese government would prohibit purchases of its products by businesses and government agencies after reports of its alleged involvement in a NSA spying program called Prism, according to the complaint by the pension fund, which cited a report in The Guardian newspaper about the NSA program. The retaliation would particularly affect the sales of IBM's Systems and Technology Group. IBM actively concealed the immediate impact the revelation of Prism had on the company's business in China, the complaint said.

In March, Weber wrote in a letter to customers that the company has not provided client data to the NSA or any other government agency under Prism or under any surveillance program involving the bulk collection of content or metadata.( Weber also reassured customers that IBM has not provided client data stored outside the U.S. to the U.S. government under a national security order, such as an order under the Foreign Intelligence Surveillance Act or a National Security Letter.

Other U.S. tech companies have also distanced themselves from NSA surveillance, particularly the Prism program, which raised concerns among customers worldwide about the safety of their data from U.S. government spying.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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John Ribeiro

IDG News Service
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