NEW YORK -- An amended complaint in the shareholders' lawsuit against Abercrombie & Fitch has been filed, consolidating a number of previous lawsuits, leaving out any mention of selective disclosure and dropping Lazard Freres and one of its...
NEW YORK -- An amended complaint in the shareholders' lawsuit against Abercrombie & Fitch has been filed, consolidating a number of previous lawsuits, leaving out any mention of selective disclosure and dropping Lazard Freres and one of its analysts as defendants in the case.
Prior to the consolidation of the actions, the lawsuits initially charged selective disclosure, based on information that an A&F investment relations executive, Lonnie Fogel, had disclosed regarding slowing sales trends to Todd Slater, an analyst at Lazard, on Oct. 8. That information, according to the lawsuits filed in October, was not the same information given to other analysts that were also following the company. Fogel was placed on administrative leave in mid-October, and is no longer with the company.
In the new class-action lawsuit, filed Dec. 14, the defendants are A&F; Michael Jeffries, chairman and chief executive officer of A&F; Seth Johnson, then vice president and chief financial officer; Fogel; and Michelle S. Donnan-Martin, vice president and general merchandise manager. Lazard and Slater have been dropped from the lawsuit as defendants.
Bernstein Liebhard & Lifshitz is lead counsel for the plaintiffs. Cauley & Geller and Berman, DeValerio & Pease are two law firms that serve as members of the executive committee. At least 18 law firms are listed as attorneys for the plaintiffs. The lead plaintiffs are Ted Hicks, Tarek Nabulsi, John Sellew, Federated National Insurance Co., Frank Haydu, Randy Silver and Bayou Fund LLC.
In the new complaint, the defendants are charged to have "knowingly and/or recklessly made materially false and misleading statements when they assured Wall Street [through conversations with numerous analysts] that growth in same-store sales at A&F remained on track and within Wall Street's expectations+."
The amended lawsuit said that in response to A&F's announcement that comps were up, but below analysts' expectations, "A&F's stock price collapsed, plunging from its close of $34 per share on Oct. 8, 1999, to close at $26.31 per share on Oct. 13, 1999, a decline of almost 20 percent."
The complaint further charged that the four individual defendants were the only ones who were "authorized to and routinely spoke on behalf of the company to investors, shareholders, analysts and reporters." The lawsuit also said that they "knew that these analysts would repeat their discussions with senior management in their published research reports, call notes, and in discussions with their firms' sales forces and with their clients."As reported, in October 1999 several shareholder lawsuits were filed against the specialty retailer and some of its employees charging securities law violations. The lawsuits were filed after shares of A&F plunged on Oct. 13, 1999, over concerns that the company would not match the double-digit sales increases it posted month after month for much of the Nineties.
Five days earlier, on the afternoon of Oct. 8, there was heavy selling of the A&F shares on rumors of a possible slowdown in growth in same-store sales. Many equity analysts who followed the company issued reports and research notes stating that the retailer had assured them that there was no basis for the rumors.
However, on Oct. 13, the company issued a press release announcing that sales in stores open more than one year were up just 12 percent for the third quarter to date, well below Wall Street estimates of between 15 to 17 percent growth in comp-store sales.
A&F has said in filings with the Securities and Exchange Commission that it intends to vigorously defend against the charges. The SEC and state regulators in Ohio also have instituted investigative actions against the Reynoldsburg, Ohio-based specialty chain.
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