KYC 0.00% 57.5¢ keycorp limited

KYC, TLS - US group claims Keycorp deceitful, suin

  1. 51 Posts.

    If you were Telstra would you now cut your losses in the company. TLS bought at 11.00 a share. In addition I have a read that KYC are due to receive a possible capital injection due in the July from TLS. Would you throw more money at a company that doesnt know what a profit is!!!

    comment from Mr Wood "It appears that the resulting operating profit this year will now be very disappointing if we don't complete the CPI transaction ... The CPI deal will deliver a benefit that will give the organisation a chance to recover from the disappointing performance this year without cost to shareholders,"

    With legal action hanging over this company, where do you see the share price going, its already on a downward trend ??

    mycall101
    do not hold KYC, but I do TLS

    US group claims Keycorp deceitful, suing for $20m
    By Sue Lowe
    June 21 2002

    The stoush between electronic payments company Keycorp and American plastic card giant CPI has turned ugly, with CPI last week adding "deceit", "unjust enrichment" and "breach of contract" to its original complaint against Keycorp.

    A trial date is set for March 25, 2003 in the US Federal Court, with CPI seeking general damages of $US11 million ($19.6 million), plus punitive damages.

    A negative outcome would mean more pain for Telstra - Keycorp's majority shareholder with a 50.43 per cent stake. Telstra paid $11 a share for its Keycorp holding in October 2000. Yesterday the shares were 97c. Keycorp has not yet disclosed the amended complaints to the market.

    The crux of CPI's claim is that Keycorp prematurely and deceptively acted on a non-binding agreement in order to inflate its disappointing year 2000 financial results with an extra $22 million in revenue.

    Under the agreement, Keycorp was to license smartcard technology to CPI in exchange for a 10 per cent stake in the company, worth $22 million.

    CPI said the deal was a first step in creating a new joint entity that the participants hoped would become America's largest smartcard company. (CPI incorporates two plastic card manufacturers, California Plasticard and Colorado Plasticard.) CPI's view was that the memorandum of understanding was contingent on further due diligence and was not legally binding.

    In an email gathered by CPI through legal discovery, Keycorp founder and outgoing vice chairman John Wood heavily pressured the then chief executive Michael Thomes into completing the deal by December 31.

    "It appears that the resulting operating profit this year will now be very disappointing if we don't complete the CPI transaction ... The CPI deal will deliver a benefit that will give the organisation a chance to recover from the disappointing performance this year without cost to shareholders," Mr Wood wrote.

    Mr Wood stepped down as an executive director last November but remains on the board.

    The lawsuit could also cause problems for Keycorp's auditor at the time, Ernst & Young.

    The auditor queried whether the MoU, signed on December 31, was a legally binding contract or just an expression of intention. It also raised concerns that share transfers from CPI to Keycorp had not occurred and that there was no completed technology licence as required under Australian accounting principles. But after seeking an opinion from Keycorp's lawyers, it signed the accounts.

    By mid 2001 talks had stalled and the deal was coming unstuck. Keycorp then raised a provision of $11.1 million in its first half accounts to cover a re-evaluation of its CPI stake to half its original value. The remaining $9.24 million was written down in the second half on the basis that the deal was no longer proceeding.

    Keycorp's initial response to the lawsuit filed in September 2001 was that there was no merit in the claims and it "intended to contest them vigorously". The company is believed to be planning a counter suit.

    Keycorp has promised impatient shareholders a return to profitability in 2003.

    Keycorp declined to comment.

 
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