IBM shareholder sues company over NSA cooperation

IBM tries to call order on shareholders

Following the revelations last summer that several companies were cooperating with the National Security Agency over its Prism surveillance program, a number have found out just how bad for business that cooperation really can be.

IBM is the latest in that list. The firm is facing a lawsuit (link opens a PDF file) from one of its own shareholders over its work with the NSA. The Louisiana Sheriff's Pension and Relief Fund claims the company violated several federal laws, seeking to hide the losses they had made following the disclosure of its relationship with the NSA.

Drastic consequences

The main claim is that IBM defrauded investors by allegedly concealing a decline in hardware sales in China. "IBM knew that disclosures of Prism caused the Chinese government to halt its business with the company," the complaint reads. "As a result, the security and privacy breaches that IBM couched as potential risks had already materialised with drastic consequences."

The plaintiff also alleges that IBM lobbied in favour of CISPA, a bill that would allow it to share customers' personal data, including data from customers in China.

China is a big market for IBM, accounting for around 5 per cent of its sales. The company reported in the Guardian that they had experienced a drop of 22 per cent in sales China as a result of its disclosure. However, hardware sales also dropped globally for IBM by 16 per cent.

The lawsuit has been brought forwards as a class action representing all IBM shareholders who purchased common stock from Jun 25 to October 16 of 2013. It is seeking compensatory damages for losses sustained as a result of IBM's accused wrongdoing, on top of lawyers' fees and expenses.

IBM spokesman Doug Shelton wrote: "These allegations are ludicrous and irresponsible; IBM will vigorously defend itself in court."