U.S. Subpoena Asks Genesco for Papers Related to Merger
Nashville-based Genesco said Monday the U.S. Attorney’s Office for the Southern District of New York issued the company a subpoena asking for documents related to its $1.5 billion merger agreement with Indianapolis-based The Finish Line.
The Finish Line is in a legal battle with Genesco over whether it can get out of its agreement to buy the shoe and hat retailer.
UBS, the Finish Line’s bank, has sued Genesco for fraud, saying that Genesco was not honest in disclosing the company’s financial information.
“The U.S. attorney’s subpoena comes on the heels of the baseless fraud allegations made by UBS 10 days ago,” Genesco Chairman and CEO Hal Pennington said. “These allegations are completely without merit and are simply part of UBS’s litigation tactics to avoid their contractual obligations.”
U.S. attorney won’t talk
The U.S. attorney’s office declined to say whether it has launched an investigation.
Other lawyers familiar with securities litigation but not connected to the case said the subpoena was significant, although it would be hard to tell what kind of long-term effect an investigation would have on the companies.
“Any time you hit the radar of a regulator at the federal U.S. attorney’s office, it is a significant event,” said Robert A. Uhl, a partner with the Beverly Hills, Calif.-based law firm Aidikoff, Uhl & Bakhtiari, which represents investors in securities arbitration. “Whether they find any fraud or not, it’s unusual for the U.S. attorney’s office to get involved when litigation is pending.”
Uhl speculated that federal investigators would want to see corporate financial information, plus supporting work documents from independent auditors, e-mails and other communications between Genesco and its auditors and within the company.
Uhl said a federal investigation “could backfire” on UBS, if the U.S. attorney’s office finds nothing improper in company documents. Genesco’s stock fell $3.14 a share, or 9.4 percent, closing at $30.17 in New York Stock Exchange trading Monday. The stock continued to fall in after-hours trading.