GRABAR LAW OFFICE INVESTIGATES POTENTIAL SHAREHOLDER ACTION ON BEHALF OF CURRENT SHAREHOLDERS OF MOHAWK INDUSTRIES, INC. (NYSE: MHK)
Current Mohawk Industries, Inc. (NYSE: MHK) shareholders who have held shares of the Company’s stock since at least April 28, 2017, have standing to seek corporate reforms, the return of funds back to company coffers and potentially a court approved incentive award if appropriate.
On September 29, 2021, a federal court has determined that securities fraud claims can move forward against Mohawk and certain of its executive officers. That action concerns Mohawk’s alleged fraudulent scheme to falsify revenues through fictitious “sales” of products that were not delivered to customers and to the reasons for the Company’s ballooning inventory. Specifically, at the end of each financial quarter, employees in Mohawk’s North American distribution centers were instructed to load goods on Company trucks on Fridays and pretend to deliver the goods on Saturdays to customers they knew were closed for deliveries and, thus, not there to accept or reject them (the “Saturday Scheme”). Mohawk would nevertheless book the revenue from these “sales” as soon as the products were put on Mohawk’s trucks. When the truth of this scheme was finally revealed to investors, over $7.4 billion in shareholder value was lost.
Unlike a class action, brought on behalf of damaged investors, a shareholder derivative action is an action brought by a shareholder of a public company on behalf of and for the benefit of the company itself against the directors and/or officers of that company. In a derivative action, shareholders “step into the shoes” of the directors and officers of a company and bring litigation that the board would be unwilling to pursue on its own.
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