Lawyers running the second shareholder class action against Freedom Foods and Deloitte have accused the two companies of “betraying mum and dad investors” as the fallout of Freedom’s accounting scandal continues.
Listed litigation funder, Omni Bridgeway has agreed to invest and fund the second lawsuit, which is being run by Phi Finney McDonald and alleges breaches of the Corporations Act, The Australian Securities and Investments Commission Act and Australian Consumer Law.
The proceedings have been lodged in the Victorian Supreme Court and come two months after Slater and Gordon launched an investor class action against Freedom Foods and Deloitte.
Deloitte has been under pressure after it signed off on not one, but two sets of accounts that Freedom Foods restated last year as part of a $590m writedown of its business. Analysts have also questioned the role of independent auditors, whose job it is to verify company accounts to ensure the accuracy of what is reported to the market.
The Australian can reveal that Freedom Foods paid Deloitte $5.4m to audit its accounts and provide other services over the past 10 years, including $1.2m for the company’s 2018 and 2019 accounts, which have since been restated and subject to the massive writedown.
Phi Finney McDonald said this action centred on “allegations of significant disclosure failures by Freedom Foods and misleading and deceptive conduct on the part of both Freedom Foods and Deloitte”.
“The above alleged conduct by Freedom Foods and Deloitte was particularly egregious and betrayed mum and dad investors who trusted Freedom Foods with their savings,” Phi Finney McDonald said. “The class action provides shareholders who bought Freedom Food between December 7, 2014 and July 24, 2020 with exceptional funding terms. The plaintiff will seek orders which would guarantee group members the lion’s share of any recovery and provide certainty that any settlement or award cannot be diluted by legal costs.” The claim has been bought by investor Lester Buch. Freedom Foods – which is also the target of an Australian Securities & Investments Commission investigation – confirmed it was served with the second shareholder class action on Tuesday and said it had appointed Arnold Bloch Leibler to defend the proceeding.
The company did not provide further comment. Deloitte also declined to make any further comment.