The Associated Press May 31, 2011, 4:35PM ET

Judge OKs settlement of suit against Vitacost.com

Vitacost.com, an online vitamin and health supplement retailer, said on Tuesday that a Florida judge has approved the settlement of a shareholder lawsuit alleging top company officials made false and misleading statements in connection with an initial public offering in 2009.

A judge for the state's 15th circuit in West Palm Beach approved the settlement after granting preliminary clearance in April.

The July 2010 lawsuit alleged that certain Vitacost officers and directors made overly optimistic statements about the company's business and failed to disclose problems before and after its September 2009 IPO. The complaint also accused certain officials of unjustly enriching themselves, and alleged a breach of fiduciary duties in the company's election of board members and in its issuance of stock and options.

Under the settlement, the company's board agreed to adopt a series of corporate governance "best practices" addressing the allegations. Those include a new insider trading policy covering stock personally held by officers and directors.

Under the settlement, the defendants denied breaching any fiduciary duties and maintained that no purchaser of its products was harmed as a result of the conduct alleged in the lawsuit.

Trading of the company's shares was halted on Dec. 7, 2010, and the Nasdaq Stock Market said the next day that it would not allow trading to resume until Vitacost supplied additional information about its finances.

The Boca Raton, Fla., company also said at that time that it was postponing its annual meeting, and disclosed that an internal investigation found financial statements dating back 16 years to be unreliable.

On Tuesday, the company said it will hold its annual shareholders meeting on July 11. Also, another special meeting is planned on July 22, when shareholders will be asked to vote on amendments to the company's bylaws and its certificate of incorporation. Vitacost said the votes are intended to ensure "that any potential defects in the company's organization documents are unquestionably cured."

Vitacost also said in a Securities and Exchange Commission filing on Tuesday that it believes it will be able to become current in its filing obligations and meet other requirements for continued listing on Nasdaq on or before June 20. However, the company also said that it could give no assurances that it will be able to comply with listing requirements.

Vitacost showed signs of instability even before it made its December revelation about its financial statements. In August, the company's chief executive officer, Ira Kerker, left the company and was replaced on an interim basis by Jeffrey Horowitz, the founder of Vitamin Shoppe Inc. That same day, the company reported a second-quarter loss, declined to issue guidance for the remainder of the year and said that its board had terminated its deal with Oppenheimer & Co. Inc. to evaluate various strategic options.


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