Superdevalued

Along with Target and General Mills, Supervalu is in the vanguard of venerable Minnesota corporations. Like them, it has cultivated an image of good citizenship, providing its employees with excellent opportunities and benefits, while bestowing its largesse upon dozens of local non profits. Sure, there might be the occasional union problem, but that’s nothing that has caused any lasting damage to Supervalu’s impeccable local image. Thus, Supervalu has come to expect a certain level of respect, if not a very generous amount of tolerance, from the local media.

Yet it seemed reasonable to assume that Twin Cities media would take a serious look at an accounting issue that had just affected thousands of local shareholders, including Supervalu employees who hold the stock as a component of their pensions. It was a ready-made local angle to the national accounting scandal, and I expected to find extensive coverage, including investigative pieces that might explain why Supervalu failed to notice a recurring and intentional misstatement that would ultimately damage earnings by $20 million over four years. Are Supervalu’s auditing standards weaker than those maintained at other publicly-he
ld companies?

Except for an extended interview of Jeff Noddle conducted by KSTP’s Julie Nelson, there was almost no in-depth local coverage. Even after Supervalu hosted an open conference call (that offered little new information beyond the June 25 press release) to discuss the restatement, the local media mostly neglected to cover the story, beyond reprinting Supervalu’s official statements.

Though it might be too much to ask local television to cover a complicated accounting scandal, it seemed perfectly reasonable to expect that the region’s largest newspaper would investigate it at multiple levels. But even Ann Merrill, the Star Tribune reporter assigned to the food industry, did little more than edit Supervalu’s press releases.

And so, as the weeks passed, it was clear that there was no forthcoming Star Tribune investigative piece on the accounting misstatements, nor a human-interest story on shareholders who were hurt by the stock’s crash. Yet the Star Tribune did not lack for Supervalu content: Nearly every day the paper contained a full page of ads for Cub Foods, a Supervalu subsidiary.

After weeks of near-silence from the local media, I called Supervalu’s Investor Relations Department and left a message expressing my concerns as a shareholder. The next day I received a voicemail from Susan Turner. She thanked me for my call and explained that, “We have filed all the necessary adjustments with the SEC.” She assured me, “The employee who was involved acted alone and is no longer with the company. If you have any questions, feel free to give me a call.”

I did have more questions, but I decided to take them directly to the SEC itself. After all, since the Enron collapse, SEC chair Harvey Pitt and his boss, President Bush, have spent a significant amount of time bad-mouthing corporate criminals while extolling “transparency” as the noble basis for all future corporate accounting. I didn’t know if a crime was committed, but because Supervalu had to file “necessary adjustments” with the SEC, I figured they’d know something about the person who misstated inventory, and Supervalu’s long delay in discovering the problem. They also might be able to tell me if there were any imminent criminal charges, and whether $20 million is a “material” sum to federal regulators. “No comment,” said someone who asked to be identified as an unnamed SEC spokesman.

Perhaps the problem was that I had called the SEC as a reporter, and not as an investor. But when I called as an investor, I was told to submit my questions in writing, via the website. The SEC’s website is comprehensive, and there is a section for investor complaints regarding fraud and other crimes that haven’t been reported yet. But there is nowhere to submit questions about crimes or incidents that have already occurred, nowhere an investor can go to find out what happened to the money after the fact.

On July 12, E*Trade’s company news section had a new Supervalu-related headline: “Shareholder Class Action Filed Against Supervalu Inc. by the Law Firm of Schiffrin & Barroway, LLP.” Later that same day, two additional firms announced lawsuits, and in the weeks following there were several more. I became intrigued by the language of victimization embedded in this statement and it occurred to me that I, too, had been wronged by purposeful accounting misstatements resulting in personal financial losses. At the least, having repeatedly failed to find out anything about what, exactly, had happened in Supervalu’s pharmacy unit—or even judge for myself whether it was significant news, or not—I thought it might be worth finding out if any of these law firms knew something I didn’t.

I started with Cauley, Geller, Bowman, & Coates, a Little Rock, Arkansas, firm with a website that invites potential plaintiffs to “PLEASE SELECT THE CLASS ACTION BY CLICKING HERE.” It took me a moment to scroll through the dozens of companies on the list, but I ultimately found Supervalu and a copy of the complaint filed in Federal District Court. I read it with interest, and then disappointment. It had obviously been adapted from a form used for other shareholder class actions. Spacing errors seemed to indicate where deletions or additions occurred, and several pronouns were incorrectly sexed (for example, former Supervalu CEO C. Michael Wright was referred to as “her”). I decided to find another firm.

When I contacted Shiffrin & Barroway in Pennsylvania, the receptionist referred me to a “case specialist” who asked, “Super … value? Is that—oh! There it is! Do you wanna be part of the suit?” When I asked whether she could tell me anything about what had actually gone wrong at Supervalu, she began to read to me, “The complaint charges Supervalu, Inc., and its officers and directors with issuing—” I interrupted her, explaining that I could read their press release on my own, and then asked whether there were any compelling reasons why her firm was preferable to the many others pursuing Supervalu. “Strictly up to you,” she answered. “But we’re pretty well-known, and most of our clients get plenty of money.” Over the course of two days, I contacted eight of the law firms suing Supervalu. Not one of them could tell me anything that wasn’t in the June 25 press release. Most of them couldn’t give me a reason as to why they would be superior to any of the other law firms involved in the class action. And one even told me that I had too few shares to interest most firms, anyway.

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