Former Maytag execs seek to dismiss shareholders’ lawsuit

Former Maytag execs seek to dismiss shareholders’ lawsuit
 
Date May 17, 2006
Section(s) Local News
Brief  
 
By DAVID PITT

AP Business Writer

DES MOINES — A federal judge is considering a request to dismiss a lawsuit filed by a New York investment adviser against the former Maytag Corp. and its former chief executive and chief financial officers.

Barry Yellen, an investment adviser for trust and retirement funds, accuses Maytag and two top executives of deceiving the public about the company’s business outlook last spring.

The lawsuit, filed in July in U.S. District Court, alleges that the deception in March 2005 prompted thousands of people to buy the company’s stock at artificially inflated prices that later plummeted.

The lawsuit alleges that Newton-based Maytag, former chairman and CEO Ralph Hake and former Chief Financial Officer George Moore were trying to push up the purchase price of the company because they were trying to sell Maytag and they both owned thousands of shares of Maytag stock.

Court documents said Hake had 789,438 shares of company stock and Moore held 88,187 shares.

Public comments by Hake and Moore at events like the March 7, 2005, Raymond James Institutional Investors Conference in Orlando, Fla., are a focus of the lawsuit. The executives said they expected Maytag to earn between $1.10 and $1.30 per share in 2005.

After the statements, Maytag shares rose, closing at $15.93, up from $14.70 the previous business day.

The lawsuit said that on April 22 the company publicly changed its business forecast, announcing first-quarter financial results and lowering its 2005 earnings forecast to a range of 45 to 55 cents a share.

Shares closed that day at $10.89, down from $15.10 the previous day.

The lawsuit alleges that the defendants knew in February that internal forecasts had been reduced to less than $1 a share.

According to documents filed with the Securities and Exchange Commission, the Maytag board and management discussed earnings forecasts of 97 cents to $1.77 on Feb. 10.

Attorneys for Maytag, Hake and Moore said Maytag‘s public forecasts were consistent with forecasts discussed internally at private board meetings.

“In fact, the average of the public forecast range was less than the average of the internal forecast range,” court documents say.

In addition, the executives claim that they included cautionary language in their forecasts that warned investors that numerous factors could affect earnings.

Attorneys for Yellen are seeking class-action status on behalf of all buyers of Maytag stock between March 7 and April 21, 2005.

Attorneys for both sides argued before U.S. District Court Judge Robert Pratt in Des Moines on Monday. The hearing focused on Maytag‘s motion for a dismissal of the case. The attorneys said there was no motive for Hake and Moore to commit the fraud alleged by Yellen and no strong circumstantial evidence that the earnings forecasts were knowingly false.

Court documents say Yellen bought 20,000 shares of Maytag stock in March and April of 2005 on behalf of various clients, paying between $15.51 and $15.68 per share. His clients include pension funds, retirement accounts and individual accounts.

Whirlpool Corp. of Benton Harbor, Mich., bought Maytag on March 31, making Maytag a subsidiary of Whirlpool. Spokesman Dan Verakis said the company had no comment on the lawsuit.

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