New York, NY, Oct. 18--A New York City law firm has sued Sears, Roebuck & Co. and its executives, charging the department store operator made false and misleading statements last year about its financial outlook.
The law firm, Milberg Weiss Bershad Hynes & Lerach LLP, alleges that Sears and its executives made "materially false and misleading statements" to the market between January 17 and October 17 last year.
The firm is seeking class action status for the lawsuit, filed on Friday.
Sears issued statements saying its earnings would grow 22% in 2002 from the prior year. The statements, which also said Sears had adequate provisions for uncollectable accounts, did not disclose that Sears'''' risk for uncollectable accounts had increased during the period in question, the law firm said. The firm also said Sears inflated its earnings and balance sheet by neglecting to earmark enough reserves for uncollectable accounts.
The law firm said that on October 17, 2001, Sears said it would increase 2002 earnings by 15%, instead of the 22% it had maintained, and that its third quarter earnings would decline. The announcement led to a 32% drop in Sears'''' stock price, the law firm said.
Named as defendants in the lawsuit are Sears chief executive Alan Lacy, chief financial officer Glenn Richter and former chief financial officer Paul Liska. The action is pending in the U.S. District Court for the Northern District of Illinois, Eastern Division.
The complaint by Milberg Weiss is the first class action lawsuit taken against Sears, which on Thursday reported a 28% drop in its quarterly earnings.
