Former Intel CEO Pat Gelsinger and current interim co-CEO and CFO David Zinsner are facing a lawsuit filed by Intel shareholder LR Trust. The lawsuit alleges mismanagement and misleading disclosures regarding the performance of Intel Foundry, demanding the return of their compensation.
Allegations of Mismanagement and Misleading Statements
The lawsuit accuses Gelsinger and Zinsner of failing to communicate the poor performance of Intel Foundry (IFS), which struggled to attract major clients and incurred substantial losses. LR Trust also claims Intel failed to disclose critical risks in its 2024 Proxy Statement and issued misleading statements about IFS's growth potential. The lawsuit asserts that Intel misrepresented IFS's financial condition, operating losses, and declining internal revenue.
Specifically, Intel's production unit reportedly lost $7 billion in 2023, with losses worsening in 2024. The plaintiffs seek the return of Gelsinger's $207 million salary earned during his tenure between 2021 and 2023 and other gains to the company.
Demands and Potential Outcomes
The lawsuit seeks remedies for the alleged harm to Intel, with damages paid to the company rather than the LR Trust or individual shareholders. The plaintiffs aim to improve Intel's financial health through this process and seek punitive damages and court costs.
The lawsuit also highlights the alleged substantial compensation received by Gelsinger and Zinsner during the period of alleged mismanagement. The following statement from the lawsuit summarizes the core allegations:
"As later admitted by Intel, and in breach of the individual defendants' fiduciary duties, the true status of Intel's affairs at the time were that: (1) IFS's growth was not indicative of revenue growth reportable under its segment; (2) IFS experienced substantial operating losses in 2023; (3) IFS experienced a decline in product profit driven by lower internal revenue; (4) due to the foregoing, IFS could not be a strong tailwind to Intel’s foundry strategy; and (5) the Company failed to maintain adequate internal controls," the lawsuit states. "As a result of the foregoing, the Company's public statements were materially false and misleading at all relevant times."
You can find the lawsuit here (replace with the actual PDF link) Lawsuit [PDF]
