New York law firm Bernstein Liebhard has filed a class action lawsuit against Molson Coors Brewing, accusing the company of making false and misleading statements that resulted in misreporting net income.
The firm, which is seeking a lead plaintiff, said the suit is on behalf of those who purchased or acquired the securities between Feb. 14, 2017, and Feb. 12, 2019. The suit also names as defendants Molson Coors Chief Executive Officer and President Mark Hunter and Chief Financial Officer Tracey Joubert.
According to the lawsuit, Molson Coors failed to disclose that it did not properly reconcile the outside basis deferred income tax liability for the company’s investment in its MillerCoors, LLC partnership. As a result, it misreported net income in its consolidated financial statements for the fiscal years ending Dec. 31, 2016, and Dec. 31, 2017, resulting in an overall downward revision to net income.
The suit also accuses Molson Coors of lacking adequate internal controls over financial reporting, which it said led to statements about its business, operations, and prospects that “were materially false and misleading and/or lacked a reasonable basis at all relevant times.”
In a Feb. 12 SEC filing, Molson Coors said that the audit committee of the its board of directors, after consulting with its accountants PricewaterhouseCoopers, “concluded that the company’s previously issued consolidated financial statements as of and for the years ended December 31, 2017, and December 31, 2016, should be restated and no longer be relied upon.”
The company also said that it “concluded that the previously issued 2017 and 2016 consolidated financial statements were misstated.”
As a result, the company restated its financial statements for the year ended Dec. 31, 2016, to increase its deferred tax liabilities and deferred tax expense by $399.1 million, with a corresponding decrease in net income and earnings per share. It also restated its financial results for fiscal year 2017 that resulted in an aggregate $247.7 million increase to the company’s deferred tax liabilities and corresponding decrease in retained earnings and total equity.
In the filing, Molson Coors also said that it “has determined that a material weakness existed in the company’s internal control over financial reporting,” adding that it “did not design appropriate controls to identify and reconcile deferred income taxes associated with the accounting for acquired partnership interests.”
The suit says that as a result of this disclosure, shares of Molson Coors fell $6.17 per share or approximately 9.5% to close at $59.19 per share on February 12, 2019, damaging investors.
“Unbeknownst to investors, the defendants repeatedly and materially misstated Molson’s financial condition in filings with the SEC,” says the suit, “while falsely representing that Molson’s financial statements complied with GAAP and that its internal controls were effective. As a result, class members were materially misled.”
The suit alleges that because of their positions with the company and access to material non-public information available to them, Hunter and Joubert knew that the adverse facts “had not been disclosed to and were being concealed from the public and that the positive representations being made were false and misleading.”
Additionally, the suit says the company and the two executives “knew that the public documents and statements issued or disseminated in the name of the company were materially false and misleading; knew that such statements or documents would be issued or disseminated to the investing public; and knowingly and substantially participated or acquiesced in the issuance or dissemination of such statements or documents as primary violations of the federal securities laws.”
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