* Company's lawyer said in Jan. hearing no pending SEC
* Shareholders filed amended complaint in March
By Emily Flitter
NEW YORK, May 30 The SEC's 18-month
investigation of Green Mountain Coffee Roasters isn't
finished, with revenue recognition among the items under the
feds' microscope, a review of court documents shows.
The transcript from a hearing in January sheds some more
light on the nature of the SEC inquiry, which is a hot topic of
debate for bulls and bears on the once high-flying stock.
Green Mountain, the maker of Keurig one-cup coffee brewers,
has never disclosed many details of the U.S. Securities and
Exchange Commission's probe.
But earlier this year, a company lawyer said the
Vermont-based coffee vendor had turned over "a ton of
The lawyer, Randall Bodner, speaking at a January hearing on
a shareholder class-action lawsuit in federal court in Vermont,
said there was no indication that the SEC was about to take any
legal action against the company or its employees.
"There's no pending action nor am I aware of any threatened
action by the SEC to make - to make - you know, to bring any
charges against the company in any way, shape or form," said
Bodner, a Ropes & Gray partner, during a hearing on a pending
shareholder class-action lawsuit filed against Green Mountain.
In the transcript, Bodner said some of the documents turned
over by Green Mountain to the SEC concerned one of its
distributors, M. Block & Sons of Chicago. But he added that
regulators "have had other requests of us."
Bodner was in court, according to the transcript, to argue
for a motion to dismiss the shareholder lawsuit, which alleged
that Green Mountain engaged in accounting irregularities in its
revenue recognition practices and its dealings with M. Block.
In response to Bodner's statement during the Jan. 5
proceeding, U.S. District Judge William Sessions III said that
if the SEC had truly concluded its investigation, the regulatory
agency would have notified the company.
"I am not saying that the SEC has completely gone away,"
Bodner told the judge.
However, Bodner said if the SEC's investigation had turned
up anything, "we would have seen some action out of them by
REVENUES AND RELATIONSHIPS
Sources close to the SEC investigation told Reuters the SEC
had four people working on the case, including two forensic
The SEC declined to comment on the case.
M. Block did not return calls seeking comment.
The Waterbury, Vermont-based company first disclosed it was
under investigation by the SEC in September 2010. Green
Mountain's disclosure stated that the SEC's investigation seemed
to focus on "certain revenue recognition practices and the
Company's relationship with one of its fulfillment vendors."
Shareholders sued two days later.
In the months that followed, short sellers, including
Greenlight Capital's David Einhorn, began attacking Green
Mountain, saying the company was engaging in "channel stuffing"
and other tricks to make sales look more robust.
Channel stuffing involves an inflation of sales and earnings
figures by pushing more products through a distribution channel
than it could sell to the public.
Soon after the court hearing in January, Sessions dismissed
the shareholder lawsuit, saying the plaintiffs' complaint didn't
do enough to establish its allegations against Green Mountain's
founder Robert Stiller and the other defendants in the suit.
But the judge gave the plaintiffs an opportunity to file an
amended complaint, which they did in March.
Bodner, who declined to discuss his comments during the
January hearing, said on Wednesday that he expects to file
another motion to dismiss the amended complaint in June.
The plaintiffs' lead attorney, David Rosenfeld, a partner at
Robbins Geller Rudman & Dowd in Melville, New York, said, "We
think that we have adequately addressed the court's concerns
with our amended complaint."