A pension fund is suing Matthews-based retailer Family Dollar, alleging executives profited by selling stock at a high price last year while misleading investors about how well the company was really doing.
The Pipefitters Local No. 636 Defined Benefit Pension Fund filed the lawsuit Thursday in federal court in Charlotte. Family Dollar CEO Howard Levine, chief financial officer Mary Winston, and chief operating officer Michael Bloom are named as defendants. The company denies the allegations.
The crux of the lawsuit is the company’s first fiscal quarter, which ended on Nov. 24. The company’s stock reached a high of $71.20 following strong results that quarter. But the company’s shares fell 13 percent on Jan. 3, when Family Dollar announced disappointing earnings and guidance.
The company continued to issue upbeat statements while executives knew results were lagging, the lawsuit says.
“Defendants issued materially false and misleading statements regarding Family Dollar’s then-present sales demand, profitability and financial results,” the lawsuit said. “(Family Dollar) failed to disclose that it was experiencing much softer than anticipated demand … resulting in much lower first quarter 2013 profits than anticipated and a build-up of unsaleable merchandise.”
Before disclosing the poor results, Levine sold $15.6 million worth of stock, the lawsuit alleges. The pension fund is seeking class action status for all Family Dollar shareholders and compensatory damages.
“By artificially inflating the price of Family Dollar stock, defendants deceived plaintiff and the Class and caused them losses when the truth was revealed,” the lawsuit said.
Family Dollar spokeswoman Bryn Winburn said there had been no improper stock trading.
“There is no foundation to the allegations…,” Winburn said in an email. “Company executives adhere to specific trading policies and trade pursuant to the company’s open trading windows.”
She said the company would defend itself “with vigor.”
Family Dollar operates more than 7,500 stores in 45 states. The company’s stock closed at $56.30 a share on Thursday, up 2.6 percent.
Observer staff researcher Maria David contributed.