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Stockholders Sue Union Pacific

November 20, 1997

DALLAS (AP) _ Shareholders are suing Union Pacific over its stock’s recent slide, claiming the nation’s largest railroad knew long ago that its merger with Southern Pacific was off track.

A class-action lawsuit representing Union Pacific shareholders who bought stock between March 4 and Oct. 1 accuses the Omaha, Neb.-based railroad of misrepresenting its safety record and failing to disclose problems involving last year’s merger.

The lawsuit, filed here Tuesday, contends that even as the railroad touted the benefits of the $5.4 billion merger, top railroad officials knew that combining the two lines would be costly. It also claims that the optimistic announcements inflated stock prices.

``It’s a fair statement to say there is no doubt that the directors and officers knew very well that those statements about the merger were false,″ Steven Schulman, a lawyer for the stockholders, said d Wednesday. Union Pacific spokesman John Bromley on Thursday would not comment on the suit.

Railroad executives said last month that fourth-quarter profits would range from $74 to $149 million. On Monday, they said the quarter results could range from break even to substantial losses.

Schulman said the type of ``stock-drop″ case he has filed is hard to win.

``It’s not because it’s not a strong case, but because the companies fight hard,″ he said.

Although Union Pacific stock rose above $72 in mid-July after starting the year at $62, it has since dropped to $58.50.

Now under fire from its stockholders, they are not the first to focus on Union Pacific.

Because of shipper complaints and rail gridlock, the Surface Transportation Board ordered UP to allow competitors to use some of its track. The STB will review on Dec. 3 whether to continue that arrangement. Economists say the problems have caused an economic toll of an estimated $1 billion so far.

Also, the Texas Railroad Commission will vote on Friday whether it would support that Union Pacific be partly broken up and forced to sell part of its track to competitors.

Meanwhile, the Federal Railroad Administration has been reviewing Union Pacific after a run of accidents resulted in seven deaths. The FRA has indicated it will fine the railroad before the end of the year.

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