Former Employees Make Allegations Against Green Mountain By: Herb Greenberg CNBC Senior Stocks Commentator AP
Usually I ignore reporting on lawsuits because anybody can say anything in a lawsuit.
But a class action lawsuit filed earlier this week against Green Mountain included allegations from several former employees of Green Mountain and its fulfillment partner, M. Block & Sons, that, in the very least, should raise eyebrows. I’ve previously written about the relationship between Green Mountain and M. Block, which is used to process most of the company’s consumer sales. Even though it distributes coffee to retailers, it is not formally a distributor. I’ve written about the relationship previously, as it has pertained to an SEC inquiry, which is ongoing.
Among the lawsuit’s allegations: * One former Green Mountain employee said the company “knowingly” overproduced products and then directed M. Block to “hold more products than it could immediately ship. Those products then had to be destroyed once they passed their expiration date.
* The same employee claimed M. Block “used rudimentary spreadsheets to track orders and delivery and that its poor tracking systems allowed Green Mountain to buy inventory, controlling the process and shuffling items into and out of M. Block’s warehouses."
* A former regional sales manager for Green Mountain said that M. Block was “a captive company and would do as Green Mountain instructed.”
* During the fourth quarter of 2009, according to a former Green Mountain employee, Green Mountain improperly recognized revenue on 150 truck loads of product shipped to M. Block. The employee further said there were no orders for those products and no payment was ever made on that shipment, which was worth between $7.5 million and $15 million. This, an employee said, after Green Mountain's business with M. Block in 2009 shot up to 75 percent from 20 percent. Furthermore, according to the lawsuit, Green Mountain waited five months to tell investors the SEC was investigating.
My take:SEC HAS YET TO FINALIZE their proceedings which does not preclude GMCR stock from going up as some analyst just dismiss the whole issue & the stock has 2x since the allegations. .