How serious is confidentiality and accurate disclosure? Take the study of Recycled Paper Greetings who issued this response to disclosure by American Greeting Card Company in its quarterly earnings call that it has acquired $44 million in first lien RPG debt.
“We were surprised both by American Greetings’ disclosure of its accumulation of Recycled Paper Greetings debt on its quarterly earnings conference call, as well as the stated answer for American Greetings’ inability to speak further about its actions when questioned by analysts,” stated Recycled Paper Greetings chief executive officer Jude Rake. “In fact, it is RPG’s position that AG’s actions represent a clear violation of a written confidentiality agreement executed as part of an overture by American Greetings. To that end, weeks before American Greetings made its announcement we filed a lawsuit in the US District Court for the Northern District of Illinois detailing our claim. We plan to continue vigorously fighting actions by AG which we believe are predatory in nature and intended for the sole purpose of preventing us from conducting business on a fair playing field.”
American Greetings’ disclosure of its accumulation of Recycled Paper Greetings debt came on its quarterly earnings conference call for the quarter ended August 29, 2008, during which the company disclosed that earnings had fallen short of analyst expectations.
“We find it curious that a much larger competitor is accumulating our debt in violation of a clear contract even as its own performance is weakening,” continued Mr. Rake. “We believe the acquisition of our debt by American Greetings reflects desperation because we are making significant, daily inroads on American Greetings in the marketplace. Although American Greetings is almost twenty times the size of Recycled Paper Greetings, more and more retailers are discovering that consumers prefer our greeting cards. When retailers test our cards versus our larger competition, our cards sell better. As more and more retailers discover this and decide to put us on their store shelves, I suspect the folks at American Greetings must be worried.”
Recycled Paper Greetings says that they will continue to vigorously fight AG’s actions. The company will continue to seek any and all legal remedies and to pursue damages.
Tags: accurate disclosure, american greeting card company, confidentiality, earnings call, jude rake, lien, recycled paper greetings, RPG debt