A Michigan public pension fund claims that Oracle had to increase its debt to meet commitments to OpenAI when the AI giant had its own shortfalls, without notifying investors of the risk.
(CN) – A public pension fund from a Michigan suburb claims in a class action tech giant Oracle defrauded him and other investors ahead of a $25 billion public offering tied to a $300 billion cloud deal with OpenAI.
The city of Sterling Heights’ Police & Fire Retirement System alleges that Oracle and its staff failed to heed warning signs about OpenAI, the controversial artificial intelligence research company whose cloud computing commitments helped propel Oracle’s artificial intelligence expansion.
“Oracle was required to disclose at the time of the February 2026 note offering that the customer primarily responsible for the dramatic growth (residual performance obligations) claimed in the registration statement – OpenAI – had missed internal revenue and new user targets and that OpenAI’s own CFO had doubts raised about OpenAI’s ability to pay from the registration statement, however, the power paid by that computer. contained such information”, writes the pension.
The pension filed its lawsuit against Oracle, certain of the company’s current and former executives and board members, and various investment banking firms involved in the underwriting and management of the February 2026 note and its registration statement.
“At the time of the filing of this complaint, the price of the notes sold in the February 2026 Notes Offering has declined significantly from their offering price, harming the plaintiff and the class,” the pension wrote in the lawsuit filed Wednesday in Davidson County, Tennessee, where Oracle has been in the process of moving its headquarters to its corporate headquarters for the past five years.
The pension fund says Oracle highlighted significant growth in its cloud business in the months leading up to the offering, with executives attributing the momentum to “big players” in the ongoing “AI revolution”.
It says Oracle informed investors that its remaining performance obligations had risen to just over $523 billion — an increase from about $97 billion last year.
The pension claims the company hinted at a possible deal with OpenAI before their $300 billion deal was officially announced months later. According to the pension, the increase in RPOs was likely tied to just one customer: OpenAI.
Pension says that at the time, OpenAI was not profitable and barely generated a fraction of the revenue needed to make its payments to Oracle, let alone its additional infrastructure commitments to various other parties.
The pension claims that in order to meet its commitments to OpenAI, Oracle had to increase its debt, forcing the company to commit tens of billions in new capital expenditures and enter into over $200 billion in long-term lease agreements.
Referring to an Oracle earnings call, the pension says executives said they expected $50 billion in capital spending in 2026 to meet demand for AI-related services, and when investors expressed concerns, executives cited previous growth in RPO.
“None of the defendants mentioned here has made a reasonable investigation or had reasonable grounds to believe that the statements contained in the registration statement are true and without omitting any material fact and were not misleading,” the pension writes.
The pension argues that by omitting these details, Oracle misrepresented its financial outlook in violation of the Securities Act, because OpenAI accounted for most of the company’s reported future earnings gains that executives often referred to.
The pension requires compensation and to cancel the purchase of banknotes.
The Sterling Heights Police and Fire Retirement System did not immediately respond to a request for comment. The pension is represented by San Diego-based law firm Robbins Geller Rudman & Dowd.
Oracle declined to comment on the case.
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