22nd Century agrees to $3 million settlement in securities lawsuit

According to Pomerantz LLP, the federal settlement involves a lawsuit filed in September 2019 in the Western District Court of New York.

22nd Century, based in Buffalo, has its cigarette-manufacturing operations in a 62,000-square-foot plant in Mocksville where it has between 45 and 51 employees.

The law firm said the settlement was approved June 30 and is valued at $3 million. A hearing is set for 11 a.m. Oct. 3.

The settlement covers a pending securities class action lawsuit brought by investors alleging, among other things, that 22nd Century, former chief executive Henry Sicignano III and former chief financial officer John Brodfuehrer violated the federal securities laws by making alleged misrepresentations or omissions regarding certain alleged stock promotion articles.

The lawsuit also claimed the defendants failed to disclose an investigation by the Securities and Exchange Commission into a material weakness in 22nd Century's internal controls, which defendants deny.

22nd Century could not be reached for comment on the proposed settlement.

In its fiscal 2022 annual report, filed May 9, 22nd Century said the $3 million settlement was "fully covered by the company's insurance."

The company has faced at least five class-action or shareholder derivative lawsuits related to shareholder claims that annual reports for 2015 through 2017 "contained false statements in violation of (SEC) regulations." The lawsuits were spurred in part by a media report in late 2018.

The common denominator in the lawsuits is that 22nd Century "made false and/or misleading statements and/or failed to disclose: that its stock was prone to manipulation through paid stock promotions; that such conduct would subject 22nd Century to heightened regulatory scrutiny by the SEC; and 22nd Century's public statements were materially false and misleading and/or lacked a reasonable basis at all relevant times."

"When the true details entered the market," the lawsuit claims, "investors suffered damages."

22nd Century announced last week the appointment of John Miller as interim chief executive - its fifth full-time or interim chief executive since July 2019.

22nd Century also disclosed last week an undefined cost-reduction initiative expected to cut expenses by $15 million annually - equivalent to about 26% of its $58.3 million in fiscal 2022 operating expenses. The goal is "to simplify operations as it continues to tighten its focus on key end markets and operating strategies."

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