Judge dismisses lawsuit against former Maytag CEO Ralph Hake, others

Judge dismisses lawsuit against former Maytag CEO Ralph Hake, others
 
Date July 11, 2006
Section(s) Local News
   
 
By DAVID PITT

AP Business Writer

DES MOINES — A federal judge dismissed a lawsuit filed by a New York investment adviser against Maytag Corp. and its former chief executive and chief financial officer.

Barry Yellen, an investment adviser for trust and retirement funds, accused former Maytag chairman and CEO Ralph Hake and former CFO George Moore of deceiving the public about the company’s business outlook last spring.

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

New York attorney Ralph Stone said Monday that Yellen will likely take the case to the U.S. 8th Circuit Court of Appeals.

“We’re still looking at the decision, but an appeal is anticipated,” he said.

The lawsuit alleged that Hake and Moore were trying to increase 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.

The lawsuit focuses on public comments made by Hake and Moore at the March 7, 2005, Raymond James Institutional Investors Conference in Orlando, Fla., and other events. 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, 2005, 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 2005 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, 2005.

Attorneys for Maytag, Hake and Moore said Maytag‘s public forecasts were consistent with forecasts discussed internally at private board meetings. They also claimed they had included cautionary language in their forecasts that warned investors that numerous factors could affect earnings.

Yellen had sought class-action status on behalf of all buyers of Maytag stock between March 7 and April 21, 2005.

U.S. District Judge Robert W. Pratt concluded in his ruling filed Friday that Yellen had not provided sufficient facts to show that Hake and Moore knew that their public statements were false or misleading.

Pratt said Yellen’s claim failed under the requirements of the Private Securities Litigation Reform Act.

Pratt found that the public announcements made by Hake and Moore were accompanied by the required cautionary statements indicating that earnings results could differ from those discussed. Those statements entitled the executives immunity from liability under federal law, Pratt ruled.

Hake and Moore left Maytag after the company was sold to larger rival Whirlpool Corp. in March. Maytag stock is no longer traded since it is now a subsidiary of Whirlpool.

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