Intel former, current CEOs sued for allegedly misleading shareholders
COLUMBUS, Ohio (WCMH) – Intel shareholders are suing the company and several of its former and current leaders, alleging the company disregarded its duties to shareholders.
The lawsuit was filed in a federal court in California by the LR Trust, a shareholder with 2,000 Intel shares. The case alleges violations of federal securities laws, fiduciary duties and other misconduct led to “substantial damage” to the company and its shareholders. LR Trust especially takes issue with Intel Foundry, which encompasses Ohio's Intel plant under construction in New Albany.
Among those being sued by name are recently retired Pat Gelsinger, who abruptly left his role as CEO on Dec. 2, current interim co-CEO and Chief Financial Officer David Zinsner and most of the board of directors. The lawsuit names Lip-Bu Tan as well, who left the board in August and is rumored to be on the shortlist for a new CEO.
However, the lawsuit alleges the named board members are neither disinterested nor independent, so they are excused from direct liability. Not listed are interim co-CEO Michelle Johnston Holthaus and three members of the board, one who joined the board in March and two who joined together in early December.
LR Trust alleges the decision to separate Intel's semiconductor manufacturing into its own unit, called Intel Foundry, resulted in billions of dollars of losses. The lawsuit alleges Intel leadership was not forthcoming about the company’s financial situation, a violation of Intel codes of conduct and federal trade law. The lawsuit points to statements from Intel leaders into March 2024 claiming Intel Foundry was boosting earnings and seeing “significant traction.”
In a section titled “The Truth Emerges,” the lawsuit points to a press release from Intel on April 2 that discussed operating losses and led to stock declines. Just weeks later, Intel filed a quarterly finance report that showed Intel Foundry declined 10% from 2023 to 2024, leading to another drop in stocks, the lawsuit said. This was followed by other stock drops, mass layoffs and further financial woes.
The LR Trust also claimed Intel leaders sought re-election to the Board of Trustees under false pretenses, writing that the current leadership team should be extended thanks in part to its work on Intel Foundry. The LR Trust alleged Intel violated its responsibilities in making these claims because they were aware of the financial situation but pretended things were productive.
The LR Trust is suing on six counts:
- Two violations of the Exchange Act
- Breaches of fiduciary duties
- Aiding and abetting breaches of fiduciary duties
- Unjust enrichment
- Waste of corporate assets
The shareholder is also seeking monetary damages from individual leaders like Gelsinger and Zinsner, pointing to the profits they have made off of Intel and asking for retributions for Intel's financial failures. The lawsuit follows a similar complaint filed in August 2024 by a St. Louis-based stockholder against Intel, Gelsinger and Zinsner, which also alleged Intel leadership was misleading shareholders.
It is unclear who exactly LR Trust is, as the lawsuit only lists that they are a stockholder who has owned its 2,000 shares continuously since November 2017. Securities and Exchange Commission documents filed by Intel at the time do not provide a clear answer, but a shareholder under the same name filed a similar stockholder complaint on behalf of and against SunTrust Banks, which ended in a $585,000 settlement, according to the SEC.
A representative for Intel said the company does not comment on pending litigation.