WPS hit with flurry of lawsuits
October 29, 2001-- Home Textiles Today,
West Point, GA — Just when it looked like things were finally settling down at WestPoint Stevens — sales improved in the third quarter, and profits, while off, met Wall Street targets — the textiles giant has been hit by a flurry of class-action lawsuits charging it misled investors by overstating its sales and hiding a weakening business outlook to shore up a sagging stock price.
The major mill, and current and former key managers — including ceo Holcombe Green Jr. and former president Tom Ward — were hit by four separate class action lawsuits last week, charging them with various violations of federal securities, and seeking unspecified damages for shareholders who bought WestPoint stock over the past 21 months.
One lawsuit, filed by the Atlanta law firm of Chitwood & Harley, charges that WestPoint and its executives made "false and misleading statements" that had the effect of "artificially inflating the market price of the company's common stock."
The suit goes on to charge that "defendants routinely hid the company's sagging business prospects and overstated its sales by improperly shipping merchandise before it was requested." The suit also charges that the company "repeatedly misled investors concerning the extent of WestPoint's inventory problems and how those problems would ultimately affect the company's business."
The suit continues, "As a result of misrepresentations like these," investors who purchased WestPoint stock between Feb. 10, 1999 and Oct. 10, 2000 "were tricked into paying more for the stock than it was actually worth."
Taking aim at key managers, it said that "during this period of artificial inflation," five former executives "took advantage of their insider status to sell hundreds of thousands of their own shares of WestPoint at artificially high prices for millions in proceeds." Specifically cited for trading activities were former cfo Morgan "Mac" Schuessler, former manufacturing chief Bill Crumley, former vp Dale Williams, and directors Gerald Mitchell and Charles McCall.
Shortly after selling their stock, the complaint charges, they "revealed that the company's sales had declined from prior periods, and earnings per share were far short of expectations. As a result of these announcements, shares of WestPoint fell to less than $9 a share after having traded at more than $34 per share earlier."
A separate lawsuit, filed by Cauley Geller Bowman & Coates of Little Rock, AR, similarly charges that WestPoint overstated its business.
Another securities fraud lawsuit was filed by Charles Piven of Baltimore and another by Milberg Weiss of San Diego.
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