National Beverage Shares Fizzing Out As Glaucus Alleges Earnings Manipulation

Glaucus Research Group proposed that National Beverage Corp. FIZZ, creator of discount sodas Faygo, Shasta, Rip It energy drinks and LaCroix sparkling water, has a history of fraud and earnings manipulation conducted through a "ludicrous corporate governance structure."

National Beverage has seen its share price nearly triple in market-cap this year. Glaucus report on Wednesday cited a previously redacted complaint made in 2012 by CEO and Chairman Nick Caporella’s former attorney David Mursten, which alleged that Caporella “admitted to manipulating FIZZ’s earnings using a “little jewel box” and by directing his son to create fake invoices,” according to Glaucus.

The report also cited that Caporella refused to allow a potential National Beverage acquirer from doing their due-diligence before acquisition, implying he was" hiding something," according to the potential acquirers attorney.

Shares of National Beverage traded recently at $43.13, down 7.2 percent on the day.

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'Ludicrous Corporate Governance Structure'

The Company’s CEO and CFO are neither paid nor directly employed by National Beverage. Instead, according to the report, they're compensated by Corporate Management Advisors, a privately held company owned by Caporella.

“Shareholders have no visibility into CMA, creating a structure ripe for fraud,” stated the report, also alleging that CMA could be the “little jewel box that Mursten described Caporella having mentioned as a tool to manipulate earnings."

'Fudging Facts'

The report also outlines two instances of lawyers or employees for National Beverage falsifying documents or “fudging facts” for the company in litigation. One instance involved Scott Rothstein, former counsel, admitting to “fudging facts” in a 2006 case. Another instance includes records from the case in question (with recently un-redacted comments) involving allegations of National Beverage managers releasing a “bogus, back-dated employment letter.”

“Such instances are frankly stunning, and, in our opinion,” stated the report, “show a culture of unethical behavior and a complete lack of respect for the integrity of the courts.“