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Pension Funds Challenge AT&T Scheme to Avoid Two-Thirds Shareholder Approval of Breakup Plan: Compla

NEW YORK - The Amalgamated Bank's LongView Fund and the pension funds of the AFL-CIO and the Communications Workers of America today filed suit in the Supreme Court of New York to stop AT&T (NYSE: T) from attempting what the funds called "an end run around shareholders" by adopting an illegal process for amending its corporate charter to permit only a majority, rather than two-thirds, of shareholder votes to authorize a major restructuring. The plaintiffs collectively own over $30 million of AT&T voting stock.

AT&T claims that the existing two-thirds voting requirement itself can be eliminated by a simple majority shareholder vote. In its preliminary proxy statement filed March 14th with the Securities and Exchange Commission, AT&T proposed to put such an amendment to shareholders at its May 23rd annual meeting.

The filing seeks a judgment that AT&T's stated position "is contrary to New York law, and that an amendment of the certificate of incorporation to delete the existing requirement of a two-thirds vote for such transactions itself requires a two-thirds vote." The lawsuit is also being brought to the attention of the Securities and Exchange Commission.

"AT&T's proposed restructuring could threaten the futures of the millions of working families who own AT&T stock," said AFL-CIO President John Sweeney. "That's why AT&T's attempt to slip this risky restructuring past shareholders by changing the rules mid-stream is wrong. Working people who are AT&T shareholders must be able to protect their right to a meaningful say in the company's future."

The plaintiffs called the AT&T proposal "a ploy to get around the needed two-thirds shareholder vote for the contemplated and much-criticized restructuring" because management realizes it can't win more than simple majority support for its breakup plan.

Individual investors own almost 60 percent of AT&T, and there are over 2.6 million shareholders of AT&T common stock alone, the lion's share of which are small investors. The plaintiffs point out that with such a diffuse shareholder base, allowing a simple majority to approve major transactions would effectively grant management carte blanche to restructure the company however it sees fit.

AT&T management wants to break AT&T into three separate companies for its broadband, wireless and long distance operations, with four publicly-listed securities. Several major institutional investors and analysts have voiced concerns over the restructuring plan that AT&T announced last October.

"AT&T management is proposing a radical restructuring that represents a total reversal in its business strategy," said CWA President Morton Bahr, noting: "AT&T should seek broad shareholder consensus, not ask shareholders to relinquish their rights before AT&T fully discloses the terms of the breakup."

Criticism of the breakup centers on the wisdom of AT&T's abandoning its bundled telecommunications service strategy while its major competitors are all moving to offer integrated services. The plaintiffs noted that AT&T's stock price plunged 19 percent in the two days following the restructuring announcement.

"We are deeply concerned that AT&T has chosen to ignore shareholder concerns regarding this major restructuring proposal, a proposal which impacts all shareholder value including the retirement savings of millions of working men and women," said Dail St. Claire, spokesperson for the Amalgamated Bank's LongView Investment Fund.



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