Shareholder’s Suit Says FileNet Executives Inflated Firm’s Stock

COSTA MESA — FileNet Corp. has been hit with a shareholder lawsuit alleging that executives made misleading statements that artificially inflated the price of the company’s stock.

Shareholder Michael I. Goldman filed suit against the company on behalf of purchasers of FileNet common stock between Oct. 19, 1995, and July 2, 1996.

The suit, which seeks class action status, charges FileNet and certain of its officers and directors with artificially inflating FileNet stock to as high as $67 a share, based on information that its core business and Watermark and Saros business units were rapidly expanding. Executives also allegedly stated that the company was successfully integrating its product lines and sales and support functions.

A FileNet spokesman said the software company denies any wrongdoing and plans to vigorously contest the lawsuit.

The complaint claims that FileNet officials sold more than 200,000 shares at prices as high as $54.50 a share, for a profit of $10.5 million, before releasing news that caused the company’s stock to fall to $23.75 on July 3.

The suit, filed in Orange County Superior Court, said several insiders, including FileNet’s financial chief and the senior vice presidents in charge of its international and customer services and support divisions, sold more than 50% of their FileNet stock.

FileNet markets and services document image and work-flow software products.