Dow Jones reports that an amended shareholder lawsuit charges top Fleming Cos. executives with deliberately misstating the company’s financial state in 2001 and 2002. The suit specifically names CEO Mark Hansen as sanctioning the misstatements.
The amended suit cites a former Fleming employee -- who was a financial analyst in its now-closed retail division -- as alleging that company executives fabricated improper deductions on supplier invoices in order to shore up sagging profits, artificially inflated the sales reports of its retail operations, and classified some recurring expenses as one-time charges to improve reported profit margins.
The alleged actions by Fleming were taking place at the same time as its supply deal with Kmart was cutting profit margins to the bone, thus forcing management to do whatever it could to improve the company’s financial outlook.
Fleming denies the charges, and describes the former employee as “disgruntled.”
The amended suit cites a former Fleming employee -- who was a financial analyst in its now-closed retail division -- as alleging that company executives fabricated improper deductions on supplier invoices in order to shore up sagging profits, artificially inflated the sales reports of its retail operations, and classified some recurring expenses as one-time charges to improve reported profit margins.
The alleged actions by Fleming were taking place at the same time as its supply deal with Kmart was cutting profit margins to the bone, thus forcing management to do whatever it could to improve the company’s financial outlook.
Fleming denies the charges, and describes the former employee as “disgruntled.”
- KC's View:
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Sure, the former employee is disgruntled.
But without giving any credence to the charges, we have to point out that being disgruntled isn’t the same thing as being a liar. (We’ve been disgruntled a few times, but our disgruntlement has always been anchored in fact, not fiction.)
Simply trying to discredit the former employee isn’t going to be enough for Fleming. It is going to have to have solid evidence to refute the charges, which have been circulating in various forums, journalistic and legal, since last fall.
