NEW YORK -- The Gitano Group Inc., its top officers, and Wal-Mart Stores Inc. have been named in a class action lawsuit here for allegedly withholding information to pump up Gitano stock.
The suit, which was filed by Gitano shareholder Robert McCruden in federal court, charges Gitano and Wal-Mart with "systematic misstatement and material omission...of material facts relating to Gitano, including the financial condition and present and future business prospects." The stock had been trading during the time of the complaint at about $2 a share, the suit points out.
The suit was filed on behalf of anyone who purchased Gitano stock between April 5, 1993, and Jan. 24, 1994.
The complaint said that the purpose of concealing the information was to "artificially inflate the market price of Gitano's common stock."
Wal-Mart, the suit said, is culpable for failing to inform the public that its policy of not dealing with companies committing criminal violations would prevent it from doing business with Gitano.
It noted that when Gitano said it would be in position to "return to profitability in 1994," it "recklessly disregarded" the fact that its biggest customer, Wal-Mart, would no longer be a client because of Gitano's import violations.
"The Gitano defendants knew that without Wal-Mart's business, Gitano would be in a precarious financial position and imminently confronting the threat of bankruptcy," according to the complaint.
As noted, Gitano filed for Chapter 11 March 1 after Fruit of the Loom offered $100 million for the company. The bid was insufficient to pay off Gitano's $130 million in secured debt.
In addition to Gitano and Wal-Mart, the action names as defendants Gitano's top executives, including Robert E. Gregory, chairman and chief executive officer, and the secured lending syndicate which, court papers state, "controlled [Gitano's] assets and operations at all relevant times."
Wal-Mart officials could not be reached for comment.
A spokesman for Gitano said the company was not aware of the complaint and could therefore not comment.
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