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Freedom Foods Group and Deloitte hit with class action
A class action has been launched against Freedom Foods Group Limited, and its auditor Deloitte, after the announcement of more than $590 million in material write-downs in asset valuations and restatements of prior year financial results.
Tony Zhang
The class action, which was filed in the Victorian Supreme Court, is brought on behalf of shareholders who acquired securities in Freedom Foods Group between 7 December 2014 and 24 June 2020.
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The class action alleged shareholders suffered losses following the company’s recent ASX announcements relating to material write-downs in asset valuations, and restatements of prior year financial results.
“The class action alleges that Freedom Foods contravened its continuous disclosure obligations by failing to keep the market informed of price-sensitive information relevant to its FY20 and historic financial performance, and further that it made statements to the market which were misleading or deceptive,” Slater and Gordon practice group leader Emma Pelka-Caven said.
The class action also alleged that auditor Deloitte engaged in misleading or deceptive conduct in making statements regarding the financial accounts of Freedom Foods throughout the claim period.
On 30 November, Freedom Foods revealed more than $590 million in write-downs and the company had restated several years’ worth of accounts.
Freedom Foods is also currently being investigated by the corporate regulator ASIC for a series of “significant” accounting problems.
It is alleged Deloitte had devised an auditing strategy that treated substantial expenditures incurred by Freedom Foods as capital assets, enabling the cereal maker to report steadily growing profits instead of huge losses.
In a number of announcements after the ASX had closed on Monday, the company revealed that its past financial results were inaccurate, among other revelations.
Freedom Foods reported, in October last year, that it earned a full-year profit of $11.6 million. But that figure has now been “restated” as a $145.8 million loss.
The cereal business also confessed its losses had since widened to $174.5 million in the last financial year.
The class action has been commenced on a no win, no fee basis and group members will not be exposed to any out-of-pocket costs as a result of their participation in the claim. Slater and Gordon will also intend to apply, at the appropriate time, for a group costs order.
It is also understood that law firm Piper Alderman stated in early December it is talking to litigation funders and investigating a potential shareholder class action against the company and its auditors.
