(CN) — Facing a tight runoff race for reelection, Senator David Perdue of Georgia is raising eyebrows with some of the stock trades he made as a sitting lawmaker.
But it is not the first time the Republican faced questions about his actions surrounding the stock market.
Thirteen years ago, Perdue was ending his tenure as CEO of Dollar General when he became a defendant in securities litigation filed soon after the company announced it would be bought and privatized.
In March 2007, Dollar General told its shareholders that private equity firm Kohlberg Kravis Roberts and Co., or KKR, would buy the company – in a $7.3 billion dollar deal – and it would purchase their shares for $22 a share. Almost immediately, seven lawsuits filed in Tennessee state courts hit the companies, Dollar General’s board and Perdue.
The initial lawsuits, seeking class-action certification, accused Perdue and the rest of the board of breaching their fiduciary duties to shareholders, failing to disclose details about the deal and placing their personal interests ahead of those who held stock in the company. The night before the company and shareholders were set to argue over a motion for summary judgment, they agreed to settle the case and Dollar General eventually paid at least $40 million.
Many of the documents filed into the consolidated case sit in a Nashville courthouse under seal. Dollar General is based in nearby Goodlettsville, Tennessee.
With his background in business, Perdue is one of the wealthiest members of Congress. However, he has not placed his financial assets in a blind trust, which has raised questions about whether he used information gleaned as a lawmaker to make trades on the stock market.
After the Senate received a briefing on Covid-19 in late January, Perdue, who was reportedly not at the briefing, purchased stock in DuPont, a company which makes personal protective equipment, according to the Atlanta Journal-Constitution. And before Perdue became chair of the Senate Armed Services Subcommittee on Seapower, he purchased stock in a company that makes submarine parts and sold the shares after they rose while working on a defense spending bill that included funding for a project involving the company, the Daily Beast reported.
Last week, the New York Times reported the Securities and Exchange Commission and the Department of Justice investigated Perdue’s sale of Cardlytics stock but the lawmaker was cleared, according to Perdue’s campaign.
Usha Rodrigues, who teaches securities and business law at the University of Georgia School of Law, said it is not surprising a lawsuit – or several – were filed soon after the announcement of the sale of Dollar General because lawsuits are common in these types of situations. And neither was it surprising that the case was settled – they typically do – because of the risk of a large judgment a company may end up paying, Rodrigues said.
Perdue became Dollar General’s CEO and chairman of its board in 2003. Today, the company runs about 16,700 stores and brought in $27.8 billion in sales for the 2019 fiscal year. The complaints filed in 2007 described the company as selling items priced $10 or less that were frequently bought, used and bought again, such as cleaning supplies and snacks.
According to the shareholders’ complaints, filed months before the economy slid into the Great Recession, Dollar General had just come off a year where its stocks had dipped in 2006 after the company missed financial projections. The company’s sales and earnings had risen steadily since then.
“Thus, Dollar General shareholders had already lived through the worst part of Dollar General’s difficult times and were finally in a position to begin enjoying the company’s economic resurgence,” said a complaint filed by two retirement funds, the City of Miami General Employees’ & Sanitation Employees’ Retirement Trust and the Louisiana Sheriffs’ Pension and Relief Fund.