Breaking News on Cosmetics Formulation & Packaging in North AmericaEU editionAPAC edition

Headlines > Business & Financial

Coty's ex-CFO accuses former employers of fraud

By Guy Montague-Jones , 11-Mar-2009
Last updated the 11-Mar-2009 at 19:17 GMT

Coty’s former chief financial officer has filed a civil complaint against the company accusing the board of “arbitrarily, capriciously, fraudulently and illegally” cheating him out of millions of dollars in stock options.

The complaint alleges that the Michael Fishoff case is merely “the tip of the iceberg” and that a number of European executives at Coty have also been treated in a similar fashion.

It claims some of these executives are legally challenging Coty and foreign government agencies are investigating the propriety of the company’s actions.

Coty is one of the biggest fragrance and cosmetic manufacturers in the business with net sales of $4bn and a portfolio of designer fragrances that includes big name brands such as Calvin Klein, Vera Wang and Chloe.

Michael Fishoff joined Coty as chief financial officer (CFO) in 2002 and is now filing a civil action against the company after being dismissed in December last year.

The problems date back to September when Coty announced a 23 percent increase in sales for the fiscal year ending in June.

Fishoff claims that when these record-breaking figurers were made public, senior executives knew that “the budgetary process was getting out of alignment, cost overruns were occurring, gross margins were declining and the current year’s performance was dramatically weakening.”

They were therefore allegedly aware that the price per share valuation of Coty’s stock for purposes of stock option awards would be “materially and dramatically” less than the $58 valuation made by J.P. Morgan in September.

Fishoff claims that Coty’s CEO Bernard Beetz then exercised 250,000 options with gross proceeds of $10m in October. He alleges that this was done “in a surreptitious manner” and was not logged in Coty’s regular books and records reflecting options exercises.

Fishoff himself then tried to exercise all his 200,000 vested options at $58 per share. He claims that this was done entirely properly but that the board of directors attempted to nullify the exercise of his options and then fired him without cause.

In light of these allegations, Fishoff is bringing a complaint for damages based on fraud under the Federal Securities laws, common law fraud, breach of contract, promissory estoppel and breaches of good faith and fair dealing.

Another ex-Coty employee has also filed a legal complaint against the company for wrongful dismissal. Ohan Karagozian claims that he was fired in October last year because he sought to assert his rights under labor law by complaining about his work status to Coty.

Karagozian alleges that he was employed by Coty as a computer technician since 2002 but was misclassified as a “consultant” depriving him of numerous benefits.

Nobody at Coty was available to comment on any of the allegations made in the two complaints.

Key Industry Events

 

Access all events listing

Our events, Events from partners...