Flooring giant Mohawk Industries has been issued a subpoena regarding a Federal investigation after a law suit alleging the company misled investors in order to hide financial difficulties and sold a defective product made at a Mohawk Plant in North Georgia.
The U.S. Attorney’s Office for the Northern District of Georgia and the U.S. Securities and Exchange Commission issued subpoenas to the company, Mohawk disclosed this week. Mohawk said it was cooperating with authorities, who were probing topics similar to those raised by a shareholder lawsuit claiming the company engaged in securities violations.
The proposed class-action suit, brought by the Public Employees’ Retirement System of Mississippi, makes searing allegations against Calhoun-based Mohawk and its chairman and chief executive officer, Jeffrey Lorberbaum. It claims Mohawk falsely booked revenue through a scheme to make deliveries on Saturdays when customers were closed and couldn’t decline product they didn’t need yet or that Mohawk knew was defective.
A spokesman for the U.S. Attorney’s Office declined comment on its subpoenas.
The suit, which refers to accounts of former employees, portrays the “Saturday scheme” as a way for the company to “conceal from investors the true reasons for the company’s ballooning inventory. When the truth was finally revealed to investors through a series of partial disclosures beginning in July 2018, the price of Mohawk common stock plunged, wiping out $7.4 billion in shareholder value.”
Mohawk said in an SEC filing Monday that it “intends to vigorously defend itself in the lawsuit” and it previously described the allegations as frivolous. It did not immediately respond Tuesday to Atlanta Journal-Constitution requests for further comment. The company’s share price fell sharply in early trading Tuesday.
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