Nokia accused of stock market violations

Nokia was accused of fraud yesterday by lawyers in New York who are suing the world's biggest mobile phone company on behalf of its shareholders.

The lawsuit alleges a string of stock market violations by Nokia and its management which centre on the company's first quarter trading statement published on Tuesday. Nokia previously published guidance saying its sales growth would be between 3 and 7 per cent in the first quarter. However, on Tuesday it revealed sales had fallen 2 per cent. The news sent Nokia's stock down 16 per cent.

The company not only faces a long battle in the US courts but it will have to make potentially highly embarrassing disclosures explaining how it got its sales guidance so wrong.

The case has been brought by Milberg Weiss Bershad Hynes & Lerach, the New York law firm that has already launched a lawsuit against Royal Dutch Petroleum and Shell Transport over the overstatement of oil and gas reserves. It claims to be the world's leading class-action firm.

Peter Seidman, an attorney for Milberg Weiss, said: "There has to be a reasonable basis for the forecast and there was no reasonable basis for the forecast at the time. It was either a knowing or reckless misstatement based on the information they had at the time."

As well as naming Nokia as a defendant in the case, Milberg Weiss has issued proceedings against Jorma Ollila, Nokia's chairman and chief executive, and Richard Simonson, its chief financial officer.

Milberg Weiss allege that the Finnish company issued a series of "material misrepresentations" to the market between 8 January and 6 April. The law firm is asking Nokia shareholders to come forward and join the class action.

Nokia was treating the lawsuit with disdain yesterday. It said: "Nokia has become aware of the filing of a class action complaint against Nokia yesterday [Tuesday] in the US District Court for the Southern District of New York alleging securities fraud in connection with statements made by Nokia regarding its first quarter results. Nokia has reviewed the allegations contained in the complaint and believes they are without merit. Nokia intends to defend itself against the complaint vigorously."

Mr Seidman said it was too early to discuss the size of damages that it will be demanding on behalf of shareholders. However he said compensation will be sought based on the difference between the Nokia share price before Tuesday's disclosure and what it would have been trading at if the market had been aware that sales were not running at a level to meet the company's 3 to 7 per cent guidance.