The lawsuit, filed by a group called "Save Sirius" on behalf of 500 Sirius shareholders, says that Karmazin and other executives knowingly sabotaged stock values in a way that violates the Racketeer Influenced and Corrupt Organizations (RICO) Act, as well as breaching the Fiduciary Duty and Sherman Act.
Michael Hartlieb, speaking for Save Sirius, noted that Sirius shareholders have lost more than 90% of their value under Karmazin's management. From a peak of around $7.70 per share in 2004-2005, the stock price of Sirius has declined steadily to about $0.31 in early November, a roughly 95% drop.
The lawsuit accuses Karmazin and other executives of deflating the stock price to make it easier to take the company private, through a number of measures including a prolonged merger process, failing to give other corporate suitors a hearing, neglecting to introduce interoperable radios and issuing XM shares to financiers who then short-sold the stock.
This isn't the first time that shareholders have taken up legal cudgels against the satcasters.
Hugh Panero, the CEO of XM, ran afoul of XM investors and the Securities and Exchange Commission for certain allegedly illegal stock transactions in 2005. A group of XM investors filed a lawsuit (later dismissed) against Panero and four other XM executives in May 2006 over the sale of $79 million of stock the year before.
Panero and the other executives were accused of issuing false forecasts of overall subscriptions and the average cost of new subscriber acquisition to inflate stock prices in the six-month period before they sold their stock. A federal judge dismissed the case in March 2007.