|Luckin Coffee Announces Special Committee Brought To The Attention Of The Board' Information Of COO Misconduct, Including Fabricating Certain Transactions|
8:38 am ET April 2, 2020 (Benzinga) Print
BEIJING, China,April2, 2020 (GLOBE NEWSWIRE)—LuckinCoffee Inc. (“LuckinCoffee” or the “Company”) (NASDAQ:LK) todayannounced that the Company’s Board of Directors (the “Board”) has formed a special committee(the “Special Committee”)to oversee an internal investigationinto certainissuesraised totheBoard’s attentionduring theaudit of the consolidated financial statements for the fiscal year ended December31, 2019 (the “Internal Investigation”).
TheSpecialCommittee is comprised ofthreeindependent directors of the Board, Mr.Sean Shao,Mr.TianruoPu and Mr.Wai Yuen Chong, with Mr.Shao serving as its chairman. TheSpecial Committee hasretained independent advisors, including independent legal advisors and forensic accountants,in connection with the Internal Investigation.The Special Committee has retained Kirkland& Ellis as its independent outside counsel. Kirkland& Ellis is assisted by FTI Consulting as an independent forensic accounting expert.TheInternal Investigation is at a preliminary stage.
The Special Committee today brought to the attention of the Board information indicating that, beginning in the second quarter of 2019, Mr.Jian Liu, the chief operating officer and a director of the Company, and several employees reporting to him, had engaged in certain misconduct, including fabricating certain transactions. The Special Committee recommended certain interim remedial measures, including the suspension of Mr.Jian Liu and such employees implicated in the misconduct and the suspension and termination of contracts and dealings with the parties involved in the identified fabricated transactions. The Board accepted the Special Committee’s recommendations and implemented them with respect to the currently identified individuals and parties involved in the fabricated transactions. The Company will take all appropriate actions, including legal actions, against the individuals responsible for the misconduct.
The information identified at this preliminary stage of the Internal Investigation indicates thattheaggregate sales amount associated with the fabricated transactions from the second quarter of 2019 to the fourth quarter of 2019 amounttoaroundRMB2.2 billion. Certain costs and expenseswere also substantially inflated by fabricated transactions during this period.The above figurehas not been independently verified by the Special Committee,its advisorsor the Company’s independent auditor, and is subject to change as the Internal Investigation proceeds. The Company is assessing the overall financial impact of the misconduct on its financial statements. As a result, investorsshould no longer rely upon the Company’sprevious financial statements and earning releases for the nine months ended September30, 2019 and the two quarters starting April1, 2019 and ended September30, 2019, including the prior guidance onnet revenues from productsfor the fourth quarter of 2019,and other communications relating to these consolidated financial statements.The investigation is ongoing and the Companywill continueto assessits previously published financials andother potential adjustments.
Luckin Coffee will release additional information concerning the Internal Investigation in due course and is committed to taking appropriate measures to improve its internal controls.