Judge Tosses Class Action Against Sugar Company
HOUSTON (CN) - A federal judge tossed a consolidated class action accusing Imperial Sugar Company of artificially inflating its stock price as it struggled to refine and pack its products.
Imperial Sugar, CEO John Sheptor, and senior vice president and CFO Harold Mechler defrauded investors over a roughly eight-month period, according to a complaint filed by the Carpenters Pension Fund of Illinois.
An explosion occurred at the company's sugar refinery in Port Wentworth, Georgia, on February 7, 2008, killing 14 workers and injuring many others. Production ceased at the facility until 2009, and the incident would allegedly lead to ongoing troubles for the company in the following years.
Investors were subsequently kept in the dark when it came to operational problems, the impact of increased competition, and the extent of the company's need to purchase refined sugar from other producers, the fund claims.
In February 2012, the fund secured the role of lead plaintiff for a consolidated securities fraud case against Imperial Sugar. By the end of March, it had filed a consolidated complaint seeking relief for a class of investors who bought the company's publicly traded common stock between December 29, 2010 and August 5, 2011.
U.S. District Judge Lee Rosenthal granted the motion to dismiss the complaint on Friday, citing numerous deficiencies in the fund's attempts to state a claim for relief.
The 66-page order explains that within the complaint there are numerous statements from former employees whose identities are kept confidential.
"In analyzing the complaint allegations here, the Fifth Circuit approach requires giving relatively less weight to the allegations from anonymous sources," Rosenthal wrote.
The judge also noted that "Carpenter's allegations do not give rise to a strong inference that the defendants knowingly misrepresented Port Wentworth's condition and productivity."
Rosenthal gave the fund until October 30 to amend its claims.