Dish Duped Investors by Hiding Cyberattack Vulnerability: Complaint

Dish Network and its senior executives defrauded shareholders when they failed to disclose that “cybersecurity deficiencies” rendered operations “susceptible to widespread service outages,” alleged plaintiff Miguel Jaramillo in a class action Thursday (docket 1:23-cv-00734) in U.S. District Court for Colorado in Denver.

The “network outage” that Dish disclosed on its Feb. 23 earnings call caused the company’s websites and apps to cease functioning, “subjected customers to authentication issues when signing into TV channel apps using their Dish credentials,” and appeared to render Dish call centers “unreachable,” said Jaramillo’s complaint. When Dish confirmed in an 8-K report Feb. 28 that the outage was due to a ransomware attack in which data was stolen from Dish’s “compromised systems,” the disclosure sent the stock plunging nearly 7%, it said.

Due to the defendants’ “wrongful acts and omissions,” plus the “precipitous decline” in the market value of the company’s shares, Jaramillo and members of his proposed class “have suffered significant losses and damages,” alleged the complaint. The named defendants are Dish, Chairman Charlie Ergen, CEO Erik Carlson and Chief Financial Officer Paul Orban.

Members of the potential class are all persons and entities that owned Dish stock between Feb. 22, 2021, when Dish filed its 10-K for the year ended Dec. 31, 2020, and Feb. 27, 2023, when Dish said it became aware of the ransomware attack, said the complaint. The positive statements Dish and its executives made during that roughly two-year period were “materially false and misleading,” and failed to disclose “material adverse facts” about the company’s “business, operations, and prospects,” it said.

During the two-year “class period,” the defendants “engaged in a plan, scheme, conspiracy and course of conduct, pursuant to which they knowingly or recklessly engaged in acts, transactions, practices and courses of business which operated as a fraud and deceit” upon plaintiff Jaramillo and the other members of the proposed class, said the complaint. Dish and its senior executives “made various untrue statements of material facts and omitted to state material facts necessary in order to make the statements made,” it said.

The scheme was intended to “deceive the investing public,” and “artificially inflate and maintain the market price of Dish securities,” said the complaint. The deceit caused Jaramillo and other members of the class to buy “Dish securities and options at artificially inflated prices,” it alleged. Dish didn’t comment Friday.