Food distributor Nash Finch agreed Tuesday to pay $6.75 million to settle a class-action lawsuit filed by shareholders who alleged the company lied to inflate its stock price.
The company issued a revised annual earnings statement on Oct. 20, 2005, contradicting some of its earlier performance claims while sparking a one-day selloff that plunged company stock values by 29 percent.
The lawsuit, filed two months later, covered investors who bought the stock between Feb. 24, 2005, and Oct. 20, 2005.
"We believed, and continue to believe, that this case lacks merit and had planned to defend the litigation vigorously," said company CEO Alec Covington in a statement issued Tuesday. The company agreed to a settlement to "eliminate the distraction and expense of further litigation."
The suit named former CEO Ron Marshall, 53, and former CFO and senior vice president LeAnne Stewart. They are included in the settlement, along with Kathleen McDermott, formerly the company's senior vice president and general counsel.
Marshall, who announced his departure Sept. 1, 2005, and left the following March, was traveling Tuesday and could not be reached for comment, according to a woman who answered the phone at his home.
The suit took particular aim at the company's $226.4 million purchase on Feb. 24, 2005, of Roundy's Supermarkets distribution centers in Lima, Ohio, and Westville, Ind., a move that Nash Finch claimed would immediately add $1 billion to annual sales and create $10 million in annual savings by eliminating redundancies, according to the lawsuit.
The company issued press releases after the acquisition that said the integration of the centers was "proceeding according to plan"; yet, the suit alleged, shareholders learned later that the company's net sales growth rate and earnings growth rate were suffering due to the acquisition.
Marshall sold 355,000 shares of company stock in the months before the revised earnings guidance was released, earning some $13.8 million, according to Thomson First Call and company data.
Lawyers for the plaintiffs in the lawsuit could not be reached for comment.
"They've been moving forward," said David Livingston of DJL Research in Milwaukee. "A lot of people that were involved in this are gone and I don't know of anybody left who would be involved in this. It's now up to the SEC what they're going to do."
In its most recent filings, the Edina company reported revenue of $4.53 billion for the year ended Dec. 29, a 2.1 percent drop from $4.63 billion a year earlier.
Matt McKinney • 612-673-7329
