A US court has dismissed a case brought against a leading American distiller by investors who claimed they had been misled about the business’ financial situation.
Kansas-headquartered MGP Ingredients had been accused of fraudulent activity by a group pension funds and retirement systems that bought shares in the firm. The allegations are particularly relevant to the group’s spirits production arm, Distilling Solutions, that makes Bourbon, rye and other American whiskeys for third-party customers.
It has been alleged that current CFO and former-interim CEO Brandon Gall, along with former CEOs David Colo and David Bratcher has known about “adverse facts” affecting the business that had been “actively concealed from the investing public”.
The plaintiffs argued that MGP increased production during the global pandemic when demand for spirits was high. MGP continued to produce at these levels even as demand normalised, and it has been claimed that company officials failed to disclose the reduced demand and increasing inventory to investors.
Distilling had accounting for over half of the company’s revenue in 2022 and 2023. However, in October 2024 MGP acknowledged the burden of that increased inventory on the business and the company lowered its estimated earnings for the year. As a result, MGP’s shares fell dramatically.
A US judge has now ruled that the plaintiffs failed to adequately prove that MGP’s executives had violated securities laws. In short, their actions were a result of mismanagement, not fraud.
Siding with MGP’s case, the judge said: “The non-fraudulent inferences proposed by defendants are more compelling.
“Given the corporate structure, business practices, compensation schemes of MGPI, and the actions of the individual defendants, it is far more likely that defendants poorly handled quickly changing circumstances and market conditions affecting their business.”
