Spectrum Sues Sculley for $300 Million
Feb. 10, 1994
NEW YORK (AP) _ Spectrum Information Technologies Inc. filed a $300 million lawsuit against former chairman and chief executive John Sculley late Wednesday, claiming breach of contract over his sudden resignation.
In a 14-page complaint, the company refuted Sculley's principal reason for resigning Monday: that he did not know before being hired last fall that the Securities and Exchange Commission was investigating Spectrum for possible violations concerning its stock.
Spectrum claims Sculley was told of the SEC probe at a dinner with Peter Caserta, president of the Manhasset, N.Y.-based telecommunications firm, and other executives three days before he signed a five-year employment agreement.
In addition, the company charged, Sculley had been trying to leave since early December, scheming to drive Spectrum's stock price low enough so that his resignation would make little difference to the company's market value.
Spectrum's stock lost more than half of its value Monday after Sculley resigned, dropping from $5.56 1/4 to $2.25. The company's shares closed Wednesday at $2.81 1/4 , up 25 cents, on the Nasdaq Stock Market.
Sculley's resignation ''caused Spectrum to sustain tremendous damages,'' the company said in the suit filed in federal court in Bridgeport, Conn.
In addition to $300 million in compensatory damages, Spectrum asked for punitive damages and an injunction preventing Sculley from using the company's trade secrets.
Sculley's spokesman, Tom Davies, called the suit ''a complete work of fiction.''
''While it alleges that John Sculley knew of the SEC inquiry, which we deny, it never states that such a vital piece of information was made available to the public,'' he said.
Sculley, the former chairman and chief executive officer of Apple Computer Inc., surprised many last October when he joined Spectrum, which holds patents on technology for transmission of computer data through cellular phones.
Observers and top Spectrum executives, in public statements, hailed Sculley as someone who could lift the company from obscurity to prominence.
But, according to Spectrum's lawsuit, there was friction almost immediately between Sculley and other executives. In November, Sculley said he want to gain control of Spectrum's board and oust its management, the suit said.
Caserta and Sculley reached a handshake agreement at that time under which Caserta would resign and give control of the company to Sculley, the suit said.
But Sculley, pressed by an advisor he brought to Spectrum, devised a plan to leave the company. On Dec. 7, he told the company he wanted to quit because of an accounting irregularity he had discovered.
That plan included a review of a Spectrum's books by accounting firm KPMG Peat Marwick, which Sculley hired, according to the lawsuit. The firm recommended a restatement of earnings for the second and third quarters of 1993 that turned a $1.06 million profit into a loss of $5.32 million. Spectrum made the declaration Monday, just moments before Sculley resigned.
KPMG Peat Marwick resigned as Spectrum's auditor on Tuesday.
''We think it is more than coincidental that their resignation follows John Sculley's by a day,'' Spectrum's chief financial officer, Salvatore Marino, said in a statement Wednesday.
The lawsuit also contradicted earlier accounts of Sculley's hiring, saying he made the first move.
''Beginning in or about October 1993, Spectrum met with Sculley for the purpose of securing a license agreement with Apple Computer,'' the suit said. ''During that meeting, Sculley initiated discussions designed to bring him to Spectrum as a corporate executive.''
Previous news accounts cited Sculley as saying that Caserta first approached him with a job opportunity in October. Sculley was impressed by a demonstration of Spectrum's wireless data technology on an Apple Newton handheld computer, according to the reports.