Shares of Calhoun, Georgia-based Mohawk Industries fell 20% on Thursday over worries involving a lawsuit against the flooring giant related to alleged financial misconduct.
The class action complaint filed last month by the Public Employees’ Retirement System of Mississippi alleges a “fraudulent scheme to fabricate revenues through fictitious ‘sales’ of products.”
The suit said the products weren’t delivered to customers and the intent was to conceal from investors the true reasons for the company’s ballooning inventory.
“When the truth was finally revealed to investors through a series of partial disclosures beginning in July 2018, the price of Mohawk common stock plunged, wiping out $7.4 billion in shareholder value,” the lawsuit said.
Throughout the period from April 2017 to July 2019 at the end of each financial quarter, the suit said that employees in Mohawk’s North American distribution centers were instructed to load goods on company trucks on Fridays and pretend to deliver them on Saturdays to customers they knew were closed for deliveries.