A federal judge dismissed a derivative lawsuit against ConAgra Foods that accused company officials of mismanagement and violating the Sarbanes-Oxley Act, according to the Associated Press. U.S. District Judge Lyle Strom said the shareholders failed to prove their case, the wire service added.
The lawsuit was filed by three ConAgra shareholders after the company revised downward its earnings from 2002 to 2005, based on a tax computation error, according to the report. Like many derivative lawsuits, the plaintiffs alleged that Bruce Rohde, who was the president, CEO, and chairman of ConAgra at that time, as well as other company officials, knew about the accounting problems and took no action to correct them, the AP noted.
However, in his ruling handed down on Wednesday, Strom said that shareholders “fail to plead a single fact that suggests that the ConAgra directors were aware of the accounting irregularities,” said AP. Strom continued: “Plaintiffs cannot successfully claim that the board members were aware of or should have been aware of these problems. These facts support the conclusion that the directors were ‘blamelessly unaware of the conduct leading to the corporate liability.’”
David Domina, a lawyer for the shareholders, told the AP the ruling would be “carefully scrutinized” before a decision is made on whether to appeal. ConAgra still faces two other shareholder lawsuits.
One of the lawsuits—which are still pending in Federal courts—accuses Rohde and other executives of hiding information about the company’s finances from the public. “Since Rohde and fellow executives were prohibited by the company’s internal corporate governance rules from selling their own ConAgra shares, Rohde manufactured a scheme to reap ill-gotten monies,” the lawsuit reportedly alleges.
“For his role…Rohde rewarded himself handsomely,” the lawsuit also stated, accusing the former executive of cashing in on “the tax scheme for $17.5 million” and receiving millions more in stock and options.