NEW YORK — Another strand has been added to Levi Strauss & Co.’s tangled web of financial and legal challenges.
This story first appeared in the January 23, 2004 issue of WWD. Subscribe Today.
A bondholder of the San Francisco-based firm has filed a lawsuit in U.S. District Court in California charging the company, its president and chief executive officer Phil Marineau and former chief financial officer Bill Chiasson with violating federal securities laws. The suit, filed last month, is seeking class-action status.
The plaintiff, Richard S. Orens, claims in the suit that Levi’s and its top officials provided false information on the company’s financial results from Jan. 10, 2001 and Oct. 9, 2003, “and caused the plaintiff and other members of the class to purchase Levi Strauss’ securities at artificially inflated prices.”
On Oct. 9, Levi’s disclosed it had discovered mistakes in its 1998 and 1999 tax returns that would cause it to restate its 2001 earnings and its third-quarter 2003 results.
According to court papers, Orens bought a total of $15,000 of Levi’s 11.625 percent bonds, which mature in 2008, in June, October and November of last year.
The suit seeks unspecified compensatory damages for all investors who purchased Levi’s bonds during the period in question. Orens is represented by Green & Jigarjian LLP of San Francisco and Schiffrin & Barrow LLP of Bala Cynwyd, Pa.
“We certainly intend to defend ourselves vigorously in court, but because it is pending litigation, we can’t get into other details,” said a Levi’s spokeswoman.
Chiasson, who could not be reached, left Levi’s last month when the company hired New York-based turnaround experts Alvarez & Marsal to help improve operations. A&M official James Fogarty has stepped in as Levi’s interim cfo.
Officials at Green & Jigarjian did not return calls and Orens could not be reached. According to court papers, Orens has sought to take part in more than a half-dozen securities-related lawsuits over the past three years.
Lawsuits are a fairly common response to the news that a company plans to restate financial results. One financial source likened the practice to “ambulance chasing.”
Still, the news is another black mark for a company that last year faced a suit from two former employees who claimed they were illegally fired for refusing to keep financial records from tax authorities and auditors. Levi’s has countersued those plaintiffs, Thomas Schmidt and Robert Walsh.
The Orens suit cites the earlier suit, which is still in preliminary stages.
Levi’s fiscal year ended in November, but the company has not yet reported results. Last year, the company warned that it expects to report a sales decline for the year, which would mark its seventh straight year of sales declines.