Shares of Mohawk Industries Inc. MHK,
It fell more than 8% in the extended session on Monday after the maker of carpets and other floor covering products said it is being sued for violations of federal securities law and is under investigation by the SEC for those alleged violations. . Debt ratings Moody’s Investors Service added to the company’s problems by calling the allegations, which include claims that the company fabricated sales figures, “negative credit and suggests aggressive business practices and possible weaknesses in corporate governance.” For the time being, however, Moody’s maintained its Baa1 investment grade ratings on Mohawk debt “because the company has good liquidity bolstered by recent debt offerings and the allegations will take time to litigate,” Moody’s said. Mohawk intends to “vigorously defend himself” in the lawsuit, he said in a filing Monday. On June 29, a complaint was filed against the company and CEO Jeff Lorberbaum, Mohawk said. He alleges that the company made revenue by attempting delivery to customers who were closed and recognized these attempts as sales, that it overproduced goods to report higher operating margins and maintained a “significant” inventory that it knew it could not sell, and valued some inventory. The inventory was delivered incorrectly or incorrectly knowing it was defective and that customers would return it, the company said in the filing. Mohawk said he received subpoenas from the US Attorney’s Office for the Northern District of Georgia and the SEC on June 25 “on issues similar to those raised” by the complaint. The company is cooperating with those authorities, it said in the filing. Mohawk shares ended the regular trading day as high as 8.7%.
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