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Cree faces shareholder class-action lawsuits

Several law firms have announced the filing of class action lawsuits on behalf of investors that purchased securities in Cree in the period prior to June 13.
On that date, Cree announced a $3 billion lawsuit filed by former Cree CEO Eric Hunter and his wife against Cree and Neal Hunter, current Cree chairman and Eric Hunter s brother.

The class action lawsuits charge that Cree s stock price was artificially inflated by a number of false statements to the marketplace. Some of these statements formed part of Eric Hunter s lawsuit, including the allegation that Cree had intentionally oversold product to C3 Corporation to artificially inflate Cree s income and stock price.

The class action lawsuits also claim that in January 2000 Cree filed a prospectus and registration statement in connection with the offering of 2.86 million shares of common stock. The prospectus failed to disclose that Cree would invest $5 million of the offering proceeds in World Theatre, Inc., a speculative start-up company in which Eric Hunter was a substantial shareholder.

In addition, in December 2000, Cree bought the UltraRF division from Spectrian Corporation for approximately 908,000 shares of Cree common stock and $30 million in cash. Cree falsely told the market UltraRF would be accretive to earnings and that, as part of the acquisition, Spectrian would enter into a 2-year supply agreement requiring it to buy semiconductor parts from Cree.

Spectrian was required to purchase, however, only if Cree sold product to it at the lowest available commercial price, a fact that Cree did not disclose. Although the UltraRF division continued to lose money for Cree, a write-down for the division s goodwill was delayed until March 2002, when Cree announced that it would take a $60-$77 million goodwill write-down for the division.

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