Seagate reaches $175 million settlement of shareholder claims it concealed sales to China’s Huawei

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(Reuters) – Seagate Technology reached a $175 million settlement of a lawsuit claiming it defrauded shareholders by concealing it violated U.S. export control laws by selling more than $1.1 billion of hard disk drives to China’s Huawei Technologies.

A preliminary settlement of the proposed class action against Seagate, Chief Executive Dave Mosley and Chief Financial Officer Gianluca Romano was filed late on Friday in San Francisco federal court and requires a judge’s approval.

Shareholders led by pension funds in Arkansas, Mississippi, Germany and Luxembourg said Seagate inflated its profit and share price by concealing its sale of more than 7.4 million hard disk drives to Huawei.

Seagate denied wrongdoing in agreeing to settle. Its alleged violations culminated in a $300 million penalty from the U.S. Department of Commerce’s Bureau of Industry and Security in April 2023, the largest civil penalty not tied to a criminal case in that agency’s history.

Seagate did not immediately respond to requests on Monday for comment.

The company has set aside $105 million for the settlement and estimates that insurers would pay about $70 million of the settlement amount.

The proposed class period runs from September 14, 2020, to April 19, 2023.

Seagate is based in Singapore and incorporated in Ireland, according to regulatory filings, and has U.S. operations in Fremont, California.

Huawei, based in Shenzhen, operates in more than 170 countries and has about 213,000 employees. The U.S. government put Huawei on a trade blacklist in 2019 for national security reasons. It later restricted the sale to Huawei of some foreign items made with U.S. technology. Huawei has denied it is a threat.