Spilt almond milk: US growers in legal stoush with Perrich family’s Freedom Foods
ASX-listed health food distributor Freedom Foods has been hit with legal action in California after a key supplier alleged the company withheld payments for a well-known almond milk brand to fund dividend payouts to shareholders.
Freedom Financing, a wholly owned subsidiary of the $1.2 billion listed group was last month sued by Sacramento-based Blue Diamond, US court documents lodged in December, and obtained by The Age and The Sydney Morning Herald, show. Blue Diamond, a co-operative of more than 3000 almond farms, produces the Blue Diamond Almond Breeze milk range.
The almond milk products are available at Woolworths, Coles and Foodworks in Australia as well as other outlets. The Almond Breeze brand is also popular in cafes. Freedom Foods, which counts the billionaire western Sydney-based Perrich clan as its majority shareholder and three members of the family as directors, has had a distribution contract with Blue Diamond since 2011. Blue Diamond sells over $US1.5 billion ($2.18 billion) in almonds globally each year.
However, Blue Diamond alleges Freedom’s subsidiary Freedom Financing stopped paying Blue Diamond the full amount of its invoices from July last year. It alleges the shortfall in payments is “at least” $US7.87 million ($11.3 million). It is seeking that amount, plus interest and costs. It has also asked that a receiver be appointed to Freedom Financing to trace the assets of Freedom Financing.
“Demand has been made for payment of that sum, but Freedom Financing has refused to pay it,” court documents say.
Blue Diamond believes Freedom Financing continued to accept delivery of Blue Diamond’s products while allegedly, according to court documents, “funnelling much, if not all, of its cash upstream to Freedom Group and/or elsewhere within Freedom Group’s family of companies”.
Demand has been made for payment of that sum, but Freedom Financing has refused to pay it.
Court documents filed by Blue Diamond.
Freedom paid a 3.25 cents final dividend in December, equivalent to around $8.8 million.
“Blue Diamond is informed and believes and, on that basis, alleges that some or all of the funds Freedom Group used to underwrite a December 2, 2019 stock dividend payment to its shareholders came from monies Freedom Financing previously funnelled to Freedom Group, instead of remitting it to Blue Diamond,” Blue Diamond alleged in court documents.
Blue Diamond said that as recently as June 2019, Freedom group chief executive Rory Macleod had given oral assurances that Freedom Financing was due to pay the debts rather than other Freedom entities.
According to Blue Diamond the failure to pay its alleged bills and the payment of the dividend constitute a “fraudulent conveyance” (ie, an avoidance of debts through the transfer of monies) under Californian law.
“[Freedom Financing] made that transfer of funds with an intent to hinder, delay or defraud Blue Diamond.”
Freedom acknowledged the legal action filed against it by Blue Diamond late on Friday following inquiries by The Age and The Sydney Morning Herald.
In the statement to the ASX it assured investors of ongoing supply of Blue Diamond’s products and said that all payments on past shipments had been made. Freedom also said its relationship with Blue Diamond was “expected to continue into the longer term”. It did not respond to specific allegations regarding the dividend payment or allegations of fraud made by Blue Diamond.
Blue Diamond declined to comment citing ongoing litigation.
Freedom net profit for the year to June 30, 2019 declined 9 per cent to $11.6 million. Net sales revenue for the period rose 34.9 per cent to $476.2 million.
Sarah Danckert is a business reporter.
Source: Thanks smh.com