Gildan Activewear Inc. is facing the possibility of a $500-million class-action lawsuit over allegations executives earned millions by selling shares before news of problems at the company's Dominican Republic plant sent the stock plummeting. German institutional investor Metzler Investment GMBH is the lead plaintiff in the proposed suit. It claims to have lost around $900,000 after information about the problems at the plant was released.


 


In a statement of claim filed in Ontario Superior Court late last week, but made public Monday, Metzler alleged that Gildan CEO Glenn Chamandy and a holding company in his name made $95.2 million U.S. selling shares between Aug. 9 and Dec. 5, 2007. Chief financial and administrative officer Laurence Sellyn allegedly earned $802,827 Canadian selling shares on Dec. 20 and 21.


 


The plaintiff argues Gildan knew or ought to have known the severity of the problems at the Dominican facility, and had a duty to promptly pass that information on to investors.


 


“The defendants were reckless or, at a minimum, negligent in failing to realize that fact and in failing to prevent the misrepresentations alleged herein,” the claim states.


 


“Accordingly, the defendants have violated their duties to the plaintiffs and to persons or entities similarly situated.”


 


The class action filed by law firm Siskinds LLP is brought on behalf of all persons who bought Gildan securities between Aug. 2, 2007, and April 29, 2008, and who held those shares on April 29.


 


Gildan has not responded to the lawsuit.