Risk Management

Legal Briefs: Fruit of the Loom Settles

Executives stretched the truth and improperly enlarged the company's share price, lawsuits had claimed.
Stephen TaubMarch 22, 2006

Another scandal from the 1990s has finally been resolved.

Two class-action settlements totaling $42 million against Fruit of the Loom Inc. have been approved by a federal judge, according to the Associated Press.

The lawsuits had been filed in 1998 and 2000 in U.S. District Court in Bowling Green, Kentucky, where Fruit of the Loom is headquarters, reported the AP. The suits accused former chief executive officer William Farley and acting chief financial officer C. William Newton of inflating the company’s share price by lying to analysts, the wire service elaborated.

One settlement reportedly covers stock purchased between July 24, 1996, and September 5, 1997; the other covers September 28, 1998, through November 4, 1999. “There will be thousands of people involved in each case,” plaintiffs’ attorney Amber Eck told the AP.

“Clearly, the public interest is served by the settlements since recovery has been obtained for such a large number of class members in the investing public,” U.S. District Judge Joseph H. McKinley Jr. reportedly wrote in his 17-page order.

Individuals will receive between $1.01 and $4.07 per share, depending upon when they made their purchase, according to the report.

Company spokeswoman Stephanie Hoefken declined to comment to the AP; Farley and Newton were unreachable for comment.

Fruit of the Loom, which filed for Chapter 11 in 1999, was bought by Warren Buffett’s Berkshire-Hathaway Inc. in 2002.