CALIFORNIA: Data storage giant Seagate Technology has agreed to pay $175 million to settle a shareholder fraud lawsuit accusing the company of concealing billions of dollars in sales to Huawei Technologies, marking a significant development in a long-running legal dispute tied to US export restrictions.
A preliminary settlement agreement was filed in a federal court in San Francisco on Friday. The proposed class-action lawsuit named Seagate, Chief Executive Officer Dave Mosley, and Chief Financial Officer Gianluca Romano as defendants. The agreement remains subject to judicial approval.
The lawsuit was brought by institutional investors, including pension funds from Arkansas, Mississippi, Germany, and Luxembourg. Shareholders alleged that Seagate failed to disclose the sale of more than 7.4 million hard disk drives to Huawei, transactions valued at over $1.1 billion. According to the complaint, the undisclosed sales boosted the company’s profits and contributed to an inflated share price during the class period.
While Seagate has denied any wrongdoing, the company chose to settle the case to avoid continued litigation. The settlement stems from broader scrutiny of Seagate’s business dealings with Huawei following US government restrictions imposed on the Chinese technology giant.
The controversy intensified in April 2023 when the Bureau of Industry and Security imposed a $300 million civil penalty on Seagate. The agency said the company violated export control rules by shipping hard drives to Huawei after stricter US regulations came into effect. The penalty was the largest civil fine in the agency’s history that was not connected to a criminal case.
Under the proposed settlement, Seagate has already reserved approximately $105 million, while insurance providers are expected to contribute around $70 million toward the total payout. The settlement covers investors who purchased Seagate securities between September 14, 2020, and April 19, 2023.
Headquartered in Singapore and incorporated in Ireland, Seagate maintains major operations in Fremont, California. Huawei, based in the Chinese city of Shenzhen, operates in more than 170 countries and employs roughly 213,000 people worldwide.
The dispute traces back to escalating tensions between Washington and Beijing over technology and national security. The United States placed Huawei on a trade blacklist in 2019, citing security concerns, and later tightened restrictions on exports involving US-origin technology. Huawei has consistently denied allegations that it poses a security threat.
Lawyers representing shareholders are expected to seek legal fees amounting to as much as 25% of the settlement fund, according to court filings.
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