Nature's Sunshine dealt legal blow
Monday, May 21, 2007
http://www.heraldex
GRACE LEONG - Daily Herald Several Nature's Sunshine shareholders scored a partial victory when a federal judge on Monday denied for most part the company's efforts to dismiss a lawsuit accusing it of falsifying financial statements to its auditors and federal regulators.
In November, five shareholders sued Nature's Sunshine, its president and CEO Douglas Faggioli, former CFO Craig Huff, and Franz Cristiani, former chairman of the audit committee, in a consolidated class action suit filed in U.S. District Court in Salt Lake City.
The defendants were accused of filing misleading Sarbanes-Oxley Act certifications, Form 10-Q earnings reports and press releases with the U.S. Securities and Exchange Commission to illicit "clean" audit reports from its former auditor, KPMG LLP.
U.S. District Judge Ted Stewart, in Monday's ruling, said he found KPMG, the source of the shareholders' allegations, to be reliable, and that the allegations' "level of detail is sufficient, as is the coherence and plausibility of the facts."
The suit said KPMG's investigation found electronic evidence showing Faggioli knew of an alleged fraud in the company's international operations, and yet signed two letters to KPMG in March and August of 2005 stating the contrary. He was also accused of approving a payment in violation of the Foreign Corrupt Practices Act.
"The court finds that plaintiffs have set forth factual allegations which support that Nature's Sunshine took steps to cover-up a misdeed, failed to take remedial actions required by KPMG, and that suspicious insider trades took place," Stewart wrote.
Faggioli was accused by the class shareholders of reaping $2.15 million when he sold more than 108,454 shares of stock in what the suit called "suspiciously timed" deals.
"As to Faggioli's stock trades, the court finds that plaintiff has pleaded sufficient facts, which, if true, support that Faggioli's trades were at times and in quantities that were suspicious in light of his total stock holdings, that the trades were not normal and routine, and that profits reaped were substantial in relation to compensation level," Stewart wrote.
Steven Anreder, Nature's Sunshine's spokesman, declined to comment on Monday's ruling. He said the company "disagreed with the allegations in the complaint and expects to successfully defend them on the merits."
This story appeared in The Daily Herald on page A1.
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