Shareholders’ Fraud and RICO Suit Moving Forward against Mohawk

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February 22, 2022

RKS achieved a significant victory on behalf of its clients including Soroban Capital, Corvex Management and Incline Global Management, defeating a motion to dismiss RICO and securities fraud claims against Mohawk Industries and its highest-ranking corporate officers.

RKS is pursuing claims on behalf of several funds against Mohawk, the world’s largest manufacturer of flooring products, and its CEO Jeffrey Lorberbaum and CFO Frank Boykin.  The actions allege Mohawk concealed from investors that it was: (i) engineering false sales through strategically timed, end-of-quarter, staged deliveries to customers it knew would not accept the deliveries that quarter (if at all); (ii) concealing multiple, material production problems with its high-demand luxury vinyl tile product, while falsely attributing its failure to produce sufficient product to “capacity constraints;” and (iii) manipulating profit margins with excessive production of flooring product, generating a volume that far outstripped customer demand.

RKS asserted claims for common law fraud and RICO on behalf of its professional investor clients arising from these alleged schemes, which include claims for treble damages and attorneys’ fees.  The court denied a motion by the defendants to dismiss these claims, handing the shareholders a significant victory and allowing the claims to proceed towards trial in Georgia state business court.