DONNKENNY, EXECS HIT WITH 2ND HOLDER’S SUIT
Byline: Vicki M. Young
NEW YORK — A second shareholder suit was filed Monday against Donnkenny Inc., charging executives with withholding material financial information.
Like the first suit, brought Nov. 12, the suit names as defendants three executives, in addition to the company — Donnkenny chief executive officer and president Richard Rubin, former chief financial officer Edward T. Creevy and former controller Ronald Hollandsworth. Both suits were filed in Manhattan federal court.
The shareholder in the second suit, Joel Mael, said he purchased 2,000 shares of the company’s common stock on October 4, 1996, at $14.654 per share. The stock closed Tuesday at 4 7/16, up 1/4, in over-the-counter trading, with 2,390,500 shares in action. Mael’s suit focuses on the period between Sept. 24, and Nov. 13 and centers on a Donnkenny press release dated Sept. 24, in which the company said that the amended quarterly reports for the 1995 fiscal year and the first two quarters of fiscal 1996 “will not affect the previously reported results for the year ended Dec. 2, 1995.”
The suit charges Donnkenny with committing a fraud on the stock market by failing disclosing the “true financial and operating condition of the company” to investors. The complaint said that Donnkenny and the three executives had “actual knowledge of the misrepresentations and omissions of material facts” or had “acted with reckless disregard for the truth in that they failed to ascertain and to disclose such facts.”
The suit notes that Donnkenny’s auditors KPMG Peat Marwick resigned because the accounting firm said it could “no longer be able to rely on representations of all three members of financial management.”
Donnkenny released third-quarter earnings on Friday, which were below analysts estimates, and the company also said Friday that its 1996 earnings would be “significantly below” analysts’ estimates, which ranged between $1.30 and $1.40 a share.