MINISCRIBE BACKERS FINED $568 MILLIONJURY ORDERS H&Q, WILES TO PAY FRAUD DAMAGES
Published: Wednesday, February 5, 1992
Edition: Morning Final<
Section: Business
Page: 1G
Source: By MIKELANGBERG, Mercury News Staff Writer
In a stunning verdict, a Texas jury on Tuesday ordered the backers of Miniscribe Corp., a failed Colorado disk-drive manufacturer, to pay damages of $568 million for fraud and misrepresentation.
Hambrecht & Quist Inc., a prominent San Francisco investment banking firm and financial pillar of Silicon Valley, was ordered to pay $45 million. WilliamHambrecht, the firm's chairman, was ordered to pay an additional $35 million out of his own pocket.
Q.T. Wiles, a one-time chairman of both H&Q and Miniscribe, quit the Longmont, Colo., company shortly before the internal investigation became public. On Tuesday, the jury ordered Wiles to pay $250 million. Wiles' attorney could not be reached for comment.
Coopers & Lybrand, an accounting firm that audited Miniscribe, was ordered to pay damages of $200 million. A spokesman at the firm's New York headquarters declined to comment. H&Q quickly said it would appeal the state-court verdict, a process likely to take many months. The firm also said it believes the damage award to a Galveston, Texas, investment firm hurt by Miniscribe's collapse will either be overturned or greatly reduced.
''Damages of $550 million for an out-of-pocket loss of $13 million (to the investment firm) is absurd," said Steven N. Machtinger, H&Q's senior vice president and general counsel, in a telephone interview from Galveston. "We're confident the verdict will either be thrown out entirely or reduced on appeal. The appeal process will take several years to complete and we intend, in the meantime, to carry out our business as usual."
Machtinger also denied that H&Q had any knowledge of fraud at Miniscribe and said H&Q was among the scandal's victims. WilliamHambrecht, Machtinger added, helped to uncover the fraud through his "diligence as an outside board member." Miniscribe collapsed in 1989 after internal investigations revealed several years of artificially inflated sales and profits -- including shipment of boxes containing bricks instead of diskdrives. The company's assets, minus any legal liabilities, were later sold to Maxtor Corp. of San Jose.
The verdict, by a vote of 10-2, is another major victory for Houston superlawyer Joe Jamail Jr., best known for convincing a Texas jury in 1985 to award his client, Pennzoil Co., an unprecedented $10.3 billion from Texaco Inc. after arguing that Texaco interfered with Pennzoil's planned acquisition of Getty Oil Co. Texaco, after several years of unsuccessful appeals, was ultimately forced into bankruptcy proceedings to cope with paying the judgment. ''It wasn't bad," Jamail said Tuesday of the Miniscribe damage award. "It was almost as good as Pennzoil."
Jamail has become a rich man through his courtroom victories. Forbes magazine last year named him one of the 400 wealthiest Americans with an estimated net worth of $350 million.