Whole Foods Alleged To Have Committed Securities Fraud

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Whole Foods Alleged To Have Committed Securities Fraud

A lawsuit brought by a shareholder alleges that Whole Foods committed securities fraud by hiding the fact that it overcharged its New York customers, which resulted in negative publicity that hurt sales and drove its price share down.

Plaintiff Yochanan Markman filed a complaint last week in federal court in Austin, Texas claiming that Whole Foods knew or recklessly disregarded that it consistently overstated the weight of pre-packaged products, causing the products to be overcharged. The complaint further states that Whole Foods’ public statements about its operations and prospects were false and misleading.

Whole Foods, which features natural and organic foods, has been sued a number of times by customers because of these overcharges. Michael Silverman, Whole Foods’ Spokesman, stated that the grocer is committed to providing “transparent, accurate pricing” to customers, adding that Whole Foods has “upheld [its] responsibility to [its] stakeholders, and are confident that this complaint is baseless and without merit.”

Shares of Whole Foods dropped over eleven percent on July 30, which resulted in a $1.7 billion drop in market value. One day later the Texas company admitted that publicity regarding the overcharges hurt its quarterly results. Whole Foods stated same-store sales growth grew by over two percent in the first ten weeks of its fiscal third quarter, but less than half of a percent after the overcharges surfaced.

The New York City Department of Consumer Affairs said the overcharges ranged from 80 cents for pecan panko to $14.84 for coconut shrimp. Co-Chief Executives, John Mackey and Walter Robb, later apologized, claiming the overcharges were accidental.

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