$40 Million Affiliated Foods Lawsuit Set for Mediation

by Mark Friedman  on Tuesday, Apr. 10, 2012 7:30 am  

In his complaint, Cox blamed the board of directors for never pressing for an audited financial statement for the fiscal year that ended in mid-2008.

Cox said in the lawsuit that the financial strain could have been detected if directors had demanded an audit, as had been provided in the past. Instead, board members relied on management’s pro forma draft, “which inaccurately presented the company’s bleak financial condition, or relied on no financial data regarding AFS,” Cox said in the lawsuit.

The board “failed to ask questions or demand an explanation for the missing information,” Cox said in the lawsuit.

Allen said in his answer that board members relied on information provided to them by Affiliated’s officials. Allen also said the directors did their job “in good faith, with the care an ordinary prudent person in a like position would exercise under similar circumstances, and in a manner they reasonably believed to be in the best interests of” Affiliated.

Both sides have agreed to use Jed Melnick of JAMS the Resolution Experts LLC of New York.

He is scheduled to hear the arguments on Tuesday and Wednesday and will be paid $6,500 a day plus expenses.

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