Friedman’s Inc., Crescent Jewelers, Whitehall Jewellers and 11 other companies are being investigated by the Justice Department over allegations made by receivables factoring company Capital Factors, according to media reports and SEC filings.
Nearly three weeks ago, Capital Factors filed a lawsuit against the 11 companies for alleging misrepresentation of a former vendor’s accounts receivables.
Capital Factors alleges that the companies intentionally or negligently participated with Cosmopolitan Gem Corp., a Bangkok-based jewelry manufacturer, in the misrepresentation of the balance of Cosmopolitan’s accounts receivable, the effect of which was to induce Capital Factors to continue to advance funds to Cosmopolitan, Friedman’s said in its SEC filing. Capital Factors also alleges that Cosmopolitan’s customers improperly made payments on accounts with Cosmopolitan directly to Cosmopolitan. Capital Factors is suing for at least $30 million and seeks punitive damages.
“Friedman’s intends to vigorously defend the claims,” the SEC statement says.
Whitehall and Friedman’s also said they were cooperating with the investigations.