Compaq Settles Claims It Inflated Stock Price

Compaq Computer Corp. has agreed to a $28.6-million settlement with a group of shareholders who accused the company of inflating its stock price by failing to disclose bad news.

The agreement with Houston-based Compaq, which was acquired recently by Hewlett-Packard Co., was reached after about a three-month mediation process.

The lawsuit, filed in 1998, alleged that Compaq failed to disclose that its reported growth in sales and earnings was actually the result of its practice of borrowing sales from future quarters. The suit also accused executives of using their knowledge of these problems to sell shares at inflated prices.

Compaq’s attorney, John L. Carter, said the settlement agreement is not an admission of guilt.

The proposed settlement will be split among investors who bought stock between July 10, 1997, and March 6, 1998.