The New York Stock Exchange has delisted Friedman’s Inc.’s class A common stock. The Savannah-based specialty retailer, which is under federal investigation for alleged fraud, said it is evaluating an appeal of the decision.
The company said that while it is disappointed with the NYSE’s decision, the delisting from the NYSE does not affect Friedman’s day-to-day business operations. The company noted that although its common stock is not eligible for trading on the NASD over-the-counter bulletin board (OTC), it understands that market makers have independently begun to make a market in the company’s common stock on the Pink Sheets under the symbol “FRDM.”
In November 2003, Friedman’s disclosed that the U.S. Securities and Exchange Commission and the U.S. Justice Department had expanded a fraud investigation to include a review of the doubtful-accounts allowance. The investigations seek to determine whether Friedman’s may have issued materially false or misleading disclosures for the period Jan. 1, 2000, through 2003. In the same month several Friedman’s shareholders filed class-action lawsuits against the company.
In March, Friedman’s said it received a “Wells Notice” from the staff of the SEC’s Division of Enforcement stating that the SEC may seek a permanent injunction, disgorgement with prejudgment interest, and civil money penalties.
The investigations stem from a lawsuit filed against Friedman’s Inc., Crescent Jewelers (Friedman’s West Coast affiliate), Whitehall Jewellers, and several other companies in August 2003. The suit was filed by receivables factoring company Capital Factors for alleged misrepresentation of the accounts receivable of Cosmopolitan Gem Corp., a Bangkok jewelry maker and a former vendor of Friedman’s. Because of the misrepresentation, claims Capital Factors, it continued to advance funds to Cosmopolitan. Capital Factors also alleged they improperly made payments on accounts with Cosmopolitan directly to Cosmopolitan.
Capital Factors is suing for at least $30 million and punitive damages.
In May the company made a number of changes to its board of directors. As of May 26, six of the eight seats on the board were filled. The six members are Norman Deep, Sheldon Whitehouse, Peggy J. Brockschmidt, Thaddeus S. Jaroszewicz, David B. Parshall, and recently appointed chairman Allan M. Edwards.
Friedman’s Inc. currently operates approximately 711 stores in 20 states, of which 224 were located in power strip centers and 487 were located in regional malls.