The Kraft Heinz Company Under Fire For Alleged Securities Exchange Act Violations

Robbins Geller Rudman & Dowd LLP  announced in a Feb. 26 press release that a class action lawsuit has been filed on behalf of purchasers of The Kraft Heinz Company common stock during the period between May 4, 2017 and Feb. 21, 2019 in order to recover damages on behalf of all purchasers of Kraft Heinz common stock during that time period. This action was filed in the Western District of Pennsylvania and is captioned Walling v. The Kraft Heinz Company, et al.

A copy of the complaint as filed is at http://www.rgrdlaw.com/cases/kraftheinz/.

The complaint charges Kraft Heinz, certain of its current and former officers and 3G Capital, Inc., one of Kraft Heinz’s largest beneficial stockholders, with violations of the Securities Exchange Act of 1934, and during the period between May 4, 2017 and Feb. 21, 2019, the defendants made false and misleading statements and/or failed to disclose adverse information regarding Kraft Heinz’s operations and financial condition.

According to the release, defendants failed to disclose that Kraft Heinz had been materially overstating the value of certain of its important product lines; that Kraft Heinz’s intangible assets, including goodwill, associated with, at least, its Kraft natural cheese, Oscar Mayer cold cuts, and U.S. Refrigerated and Canadian retail businesses were materially impaired; that Kraft Heinz had been employing improper accounting policies and procedures associated with its procurement function, including, but not limited to, agreements, side agreements, and changes or modifications to its agreements with its vendors; that Kraft Heinz had been improperly accounting for the costs of products sold; and that Kraft Heinz had been operating with material weaknesses in its internal controls over financial reporting, including controls related to the accounting and disclosure of new accounting standards, its cost of products sold, its procurement function, the impairment of goodwill and the impairment of intangible assets. As a result of this information being withheld from the market, Kraft Heinz stock traded at artificially inflated prices during the Class Period, with its stock price reaching a high of more than $93 per share.

Then on February 21, 2019, Kraft Heinz announced its financial results for the fourth quarter of 2018, including an impairment charge of $15.4 billion. The Company stated that, “[d]uring the fourth quarter, . . . [it had] concluded that, based on several factors that developed during the fourth quarter, the fair values of certain goodwill and intangible assets were below their carrying amounts. As a result, the Company recorded non-cash impairment charges of $15.4 billion to lower the carrying amount of goodwill in certain reporting units, primarily U.S. Refrigerated and Canada Retail, and certain intangible assets, primarily the Kraft and Oscar Mayer trademarks. These charges resulted in a net loss attributable to common shareholders of $12.6 billion and diluted loss per share of $10.34.” The same day, Kraft Heinz disclosed that it had received a subpoena in October 2018 from the SEC “associated with an investigation into the Company’s procurement area, more specifically the Company’s accounting policies, procedures, and internal controls related to it procurement function, including, but not limited to, agreements, side agreements, and changes or modifications to its agreements with vendors.” On these disclosures, the price of Kraft Heinz stock fell $13.23 per share, or more than 27%, to close at $34.95 per share on February 22, 2019.

Investors wishing to discuss this action or who have questions concerning this notice or their rights or interests, can contact the plaintiff’s counsel, Samuel H. Rudman or David A. Rosenfeld of Robbins Geller at 800/449-4900 or 619/231-1058, or via e-mail at [email protected].

The Schall Law Firm, a national shareholder rights litigation firm, has also announced in a Feb. 25, 2019, press release its investigation of claims on behalf of investors of The Kraft Heinz Company for violations of §§10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by the U.S. Securities and Exchange Commission.The investigation focuses on whether the Kraft Heinz Company issued false and/or misleading statements and/or failed to disclose information pertinent to investors.

Kraft Heinz announced on February 21, 2019, that it received a subpoena from the SEC in October 2018 concerning an investigation into the Company’s “procurement area, more specifically the Company's accounting policies, procedures, and internal controls related to its procurement function.” Based on this information, shares of Kraft Heinz fell almost 27.5% on February 22, 2019.

Shareholders who suffered losses can click here to participate to learn more about the investigation. Shareholders are encouraged to contact Brian Schall, or Sherin Mahdavian, of the Schall Law Firm, 1880 Century Park East, Suite 404, Los Angeles, CA 90067, at 424-303-1964, to discuss your rights free of charge. They can also visit the firm's website at www.schallfirm.com or email [email protected].