Defendants Settle Lawsuit in Collapse of MiniScribe

Quentin T. Wiles of Sherman Oaks, who was ordered by a Texas jury earlier this month to pay $250 million in punitive damages for his role in the collapse of computer disk drive maker MiniScribe Corp., has settled the lawsuit.

The precise terms of the settlement were undisclosed, but Wiles’ attorney, Dennis E. Kinnaird, said that as part of the settlement the jury award was set aside and some amount of money was paid by Wiles. Kinnaird said that despite the settlement, Wiles continues to deny any wrongdoing.

The jury in state District Court in Galveston, Tex., found that Wiles and three other defendants in the lawsuit were guilty of fraud, negligence, gross negligence and conspiracy to commit fraud. It also ordered New York accounting firm Coopers & Lybrand to pay $200 million in punitive damages. Hambrecht & Quist, an investment banking firm in San Francisco, was assessed $45 million in punitive damages, and another $35 million was levied against the investment firm’s president, William R. Hambrecht.

But all the defendants have now settled the case for undisclosed terms. The lawsuit had been filed by Kempner Capital Management Co., which bought MiniScribe debentures.

MiniScribe, based in Longmont, Colo., once appeared to be a fast-growing, profitable company, but in 1989 allegations surfaced that its profits were overstated. Wiles, MiniScribe’s chairman, resigned in February, 1989, and the company’s new management subsequently uncovered what it described as a “massive fraud” by MiniScribe executives that included doctoring the company’s books and shipping bricks instead of disk drives.

Wiles remains a defendant in several other lawsuits involving MiniScribe, including a class-action shareholder lawsuit and complaints filed by MiniScribe, its former bank and the Securities and Exchange Commission. Those suits are pending in federal court in Denver.