UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF PENNSYLVANIA

JOHN OSBORNE, BRIAN COLEMAN EVE 

COLEMAN, HELEN MILLHOUSE, and 

MATTHEW D. BROWN, as participants in and 

on behalf of the Kraft Heinz Savings Plan, and 

on behalf of all others similarly situated,

Plaintiffs,

v.

EMPLOYEE BENEFITS ADMINISTRATION 

BOARD OF KRAFT HEINZ, BERNARDO 

HEES, PAULO BASILIO, DAVID KNOPF, 

ANDREW STONER, RISHI NATARAJAN, 

YANG XU, JAMES LIU, GREG GUIDOTTI,

CHRISTOPHER SKINGER, and VINCE 

GARLATI, ,

Defendants.

Case No. 

FIRST AMENDED CLASS ACTION 

COMPLAINT

JURY TRIAL DEMANDED

FIRST AMENDED CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE 

EMPLOYEE RETIREMENT INCOME SECURITY ACT

Plaintiffs John Osborne, Brian Coleman, Eve Coleman, Helen Millhouse and Matthew D. 

Brown (“Plaintiffs”), by and through their attorneys, file this Complaint as participants in and on 

behalf of the Kraft Heinz Savings Plan (the “Plan”), and as a class action under Fed. R. Civ. P. 23 

on behalf of themselves and other similarly situated current and former employees of Kraft Heinz 

Food Company (“Kraft Heinz” or the “Company”) who were participants in and beneficiaries of 

various defined contribution retirement plans sponsored by Kraft Heinz who invested their 

retirement savings in Kraft Heinz stock through the Plan during the period of May 4, 2017, through 

February 21, 2019, inclusive (the “Class Period”). Plaintiffs allege the following based on personal 

knowledge with respect to their own circumstances and based on information and belief pursuant 

to the investigation of their counsel, which included a review of certain of the Plan’s governing 

2:19-cv-00307-MRH

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documents; the Plan’s annual reports filed with the United States Securities and Exchange 

Commission (“SEC”) and U.S. Department of Labor (“DOL”); discussions with Plan participants; 

other SEC filings by Kraft Heinz; other lawsuits against Kraft Heinz; press releases and other 

public statements issued by Kraft Heinz; and media reports and analyses regarding Kraft Heinz. 

Plaintiffs believe that substantial additional evidentiary support exists and will emerge for the 

allegations set forth herein after there has been a reasonable opportunity for discovery. 

INTRODUCTION

1. This is a class action brought pursuant to Section 502 of the Employee Retirement 

Income Security Act (“ERISA”), 29 U.S.C. § 1132, against the Employee Benefits Administration 

Board of Kraft Heinz (the “EBAB”); certain officers and employees of Kraft Heinz who are 

members of the EBAB; and the Chief Executive Officer (“CEO”) and Chief Financial Officer 

(“CFO”) of Kraft Heinz, who were responsible for appointing, monitoring and removing members 

of the EBAB (collectively “Defendants”).

2. This action is brought by participants in the Plan, and on behalf of the Plan, to 

recover many millions of dollars of damage suffered in their retirement accounts. On February 

21, 2019, after the stock market closed, Kraft Heinz announced its earnings for the fourth quarter 

of 2018. To the shock of investors, including Plan participants, Kraft Heinz disclosed that the 

Company took an impairment charge of $15.4 billion to lower the carrying amount of goodwill in 

its U.S. Refrigerated and Canada retail reporting units and the carrying amount of certain 

intangible assets, including the Company’s Kraft and Oscar Mayer trademarks. The impairment 

charge resulted in a net loss attributable to common shareholders of $12.6 billion and diluted loss 

per share of $10.34. 

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3. The Company further publicly disclosed for the first time on February 21, 2019 that 

Kraft Heinz had received a subpoena from the SEC in October 2018 in relation to the Company’s 

procurement function. As a result of the SEC investigation, the Company conducted its own 

internal investigation, which resulted in the Company recording a $25 million increase to costs of 

products sold, damaging the Company’s credibility and provoking fears of future accounting 

adjustments. 

4. On the same day, the Company announced a quarterly dividend of $0.40 per share, 

which represented a 36% reduction from the $0.625 quarterly dividend Kraft Heinz had been 

paying. The decrease was designed to save the company $1 billion a year to help reduce longterm debt of $30.9 billion

5. As a result of these disclosures, the price of Kraft Heinz common stock declined 

over 27% from $48.18 per share to $34.95 per share, erasing more than $16 billion of the 

Company’s market capitalization. Plan participants were damaged not just by this loss in value, 

but by the purchases they made at inflated prices during the time when Kraft Heinz’s stock price 

was not trading at its true value.

6. This sudden and massive write down of the Company’s goodwill could have been 

avoided. Defendants knew, or should have known, that the Company was lugging around a large 

amount of impaired goodwill and intangible assets since the merger of the H. J. Heinz Company 

and Kraft Foods, Inc. in 2015. For example, as of December 2017, the Company showed $44.8 

billion in goodwill on its balance sheet, which was 37% of the Company’s total assets. Goodwill 

and intangible assets together represented a whopping 87% of the Company’s assets. As early as 

May 2017, analysts were questioning the amount of goodwill and intangible assets the Company 

was carrying, yet no one at Kraft Heinz publicly recognized the true scope of the goodwill and 

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intangible asset impairment until February 2019, when the disclosure of the write-down severely 

damaged the Plan participants’ retirement accounts. 

7. Defendants, as fiduciaries of the Plan, owed “the highest duty known to the law” to 

Plan participants, which included a statutorily mandated duty to monitor and ensure the prudence 

of the Plan’s investments and to communicate truthfully with those to whom their duties were 

owed. Indeed, among the most important duties of the Plan fiduciaries was ensuring that each 

Plan investment option remained prudent—including investments in the Company’s own stock. 

Each Plan fiduciary had a continuing duty to monitor employee retirement funds in Kraft Heinz 

stock and to ensure that this investment remained a prudent option based on what each fiduciary 

knew (or should have known) at the time. 

8. Defendants breached those duties throughout the Class Period by imprudently 

investing in Kraft Heinz stock despite knowing (or being negligent in not knowing) that the value 

of Kraft Heinz’s stock was artificially inflated due to, inter alia, 

• the undisclosed impairment of the Company’s goodwill and intangible assets 

including its Kraft and Oscar Mayer brands and the Company’s U.S. Refrigerated 

and Canadian retail businesses; 

• undisclosed and improper accounting policies and procedures relating to the 

Company’s procurement activities including, without limitation, agreements, side 

agreements, and changes or modifications to its agreements with its vendors (which 

opened the Company up to an SEC investigation); and 

• material misstatements regarding the Company’s operating results and materially 

false and misleading disclosures in the Company’s SEC filings.

9. Moreover, Defendants are senior executives of the Company who possessed inside 

information and knowledge not available to Plan participants and were—or should have been—

familiar with the rudimentary principles of how securities trade in efficient markets. 

10. Notwithstanding Defendants’ powerful, insider position, they failed to protect the 

Plan and the Plan participants from foreseeable harm by allowing Plan participants to purchase 

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and hold an imprudent investment in Kraft Heinz stock that was disqualified under ERISA as well 

as damaging to the Plan.

11. Defendants were duty-bound to try to prevent, or at least mitigate, any damage 

caused to the Plan and its participants by the material misrepresentations, accounting errors, and 

impaired goodwill described herein. For example, through timely corrective public disclosures 

designed to remedy the Company’s inflated stock price, Defendants could have mitigated the harm 

to Plan participants by making Kraft Heinz stock an accurately priced, prudent investment again. 

12. No fiduciary in the Defendants’ position could have believed that taking corrective 

actions to disclose accounting misstatements and to remedy Kraft Heinz’s impaired goodwill

would do “more harm than good” to the Plan or to Plan participants. 

13. Kraft Heinz stock traded in an efficient market. Kraft Heinz is traded on the 

NASDAQ exchange and is a component of the S&P500 and S&P100 indices. Since January 1, 

2007, an average of 5.7 million shares of Kraft Heinz are bought and sold each trading day. 

14. Defendants should have known that correcting the Company’s misrepresentations, 

accounting errors, and impaired goodwill would reduce Kraft Heinz’s stock price only by the 

amount by which it was artificially inflated to begin with. They had no basis to believe that any 

factor was distorting the market for Kraft Heinz stock at the time—such as widespread shortselling or liquidity problems or the like—and thus no reason to fear that corrective actions would 

reduce Kraft Heinz’s stock price to anything but its true, accurate value. Moreover, Defendants 

should have known that further delays in disclosing the Company’s accounting errors, 

misrepresentations and impaired goodwill would only increase the harm suffered by Kraft Heinz 

stockholders, including the Plaintiffs and Plan participants. 

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15. As soon as the Defendants learned that Kraft Heinz’s stock price was artificially 

inflated, they should have caused the Company to make corrective disclosures in order to mitigate 

the reputational damage the Company would suffer and soften the impact of the price correction. 

And in the long term, the Company’s reputational trustworthiness would have been less 

undermined as well, making a swifter price recovery, and greater future gains, more likely. 

Defendants knew, or should have known, that disclosure of the Company’s misstatements, 

accounting errors, and impaired goodwill was going to happen sooner or later—better for 

Defendants to get out ahead of the disclosure rather than prolonging the period of artificial inflation 

during which Plan participants would continue to be damaged by purchasing Kraft Heinz stock at 

inflated prices. 

16. These false and misleading statements, and Kraft Heinz’s failure to disclose critical, 

material information to the public, caused the market to improperly value Kraft Heinz’s stock 

price. As a result, Defendants, who knew or should have known that false and misleading 

statements were continuously made, also knew or should have known that the Company’s 

misrepresentations had artificially inflated the price of Kraft Heinz stock throughout the Class 

Period. When the Company finally made brought the truth to light in February 2019, its stock 

price plummeted to its true value, dropping over 27%, from $48.18 per share to $34.95 per share, 

erasing more than $16 billion of the Company’s market capitalization. 

17. In short, the Plan participants who purchased Kraft Heinz stock paid excessive 

prices for it during the Class Period. They suffered concrete financial harm to their retirement

savings by over-paying for Kraft Heinz stock which, Defendants knew, or should have known, 

would fall sharply in value when the Company disclosed its impaired goodwill and 

misrepresentations. The Plan participants who purchased Kraft Heinz stock were damaged by 

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overpaying this amount, and they bore this foreseeable loss which could have been avoided. No 

matter what happens to the stock price in the future, these Plan participants sustained a loss due to 

paying the excessive artificial price, and they will bear this loss even if Kraft Heinz stock recovers 

in the future. Defendants should have acted to end and prevent this concrete, present harm to the 

Plan and its participants. Plan participants who simply held Kraft Heinz were damaged as well, 

particularly because Kraft Heinz’s delay in correcting the market’s misapprehension of the 

Company’s true value materially increased the likelihood of a slower-than-necessary recovery for 

Kraft Heinz’s stock price, thus increasing the duration of Plan participant holders’ losses and 

unfairly penalizing those participants who may wish to withdraw some or all of their holdings 

because Kraft Heinz stock has had time to fully recover.

JURISDICTION AND VENUE

18. This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. § 

1331 and ERISA § 502(e)(1), 29 U.S.C. § 1132(e)(1).

19. Venue is proper in this district pursuant to ERISA § 501 (e)(2), 29 U.S.C. § 

1132(e)(2), because the Plan was administered in this district, some or all of the fiduciary breaches 

for which relief is sought occurred in this district, and Kraft Heinz maintains its primary place of 

business in this district.

20. Specifically, this district is an appropriate venue for this action because the Plan

identifies its address as being in this district on the Forms 5500 filed annually with the Internal 

Revenue Service: One PPG Place, Suite 3400, Pittsburgh, PA 15222. Additionally, it is likely 

that many of the parties and potential witnesses are located in, or are within close proximity to, 

this district; because the Plan is administered at the above address, discovery relating to the 

monitoring and administration of the Plan is likely to be found at or near that address.

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PARTIES

21. Plaintiff John Osborne is a Plan participant within the meaning of ERISA § 3(7), 

29 U.S.C. § 1102(7). He was an employee of Kraft Heinz and a participant in the Plan. He 

purchased and held shares of Kraft Heinz stock in his Plan retirement savings account during the 

Class Period. 

22. Plaintiff Brian Coleman is a Plan participant within the meaning of ERISA § 3(7), 

29 U.S.C. § 1102(7). He is an employee of Kraft Heinz and a participant in the Plan. He purchased 

and held shares of Kraft Heinz stock in his Plan retirement savings account during the Class Period. 

23. Plaintiff Eve Coleman is a Plan participant within the meaning of ERISA § 3(7), 

29 U.S.C. § 1102(7). She is an employee of Kraft Heinz and a participant in the Plan. She 

purchased and held shares of Kraft Heinz stock in her Plan retirement savings account during the 

Class Period. 

24. Plaintiff Helen Millhouse is a Plan participant within the meaning of ERISA § 3(7), 

29 U.S.C. § 1102(7). She is an employee of Kraft Heinz and a participant in the Plan. She 

purchased and held shares of Kraft Heinz stock in her Plan retirement savings account during the

Class Period. 

25. Plaintiff Matthew D. Brown is a Plan participant within the meaning of ERISA § 

3(7), 29 U.S.C. § 1102(7). He is an employee of Kraft Heinz and a participant in the Plan. He 

purchased and held shares of Kraft Heinz stock in his Plan retirement savings account during the 

Class Period. 

26. Defendant EBAB is a committee established by the governing documents of the 

Plan and is a “named fiduciary” of the Plan according to those documents. The EBAB is a Plan 

fiduciary pursuant to ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A), by virtue of having 

discretionary authority and control regarding the management of the Plan and/or the Plan’s assets.

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27. Defendant Bernardo Hees is the CEO of Kraft Heinz. As CEO, Hees has fiduciary 

responsibility for appointing, monitoring and removing members of the EBAB.

28. Defendant Paulo Basilio was CFO of Kraft Heinz until October 2017 and has since 

become Head of U.S. Zone. As CFO, Basilio had fiduciary responsibility for appointing, 

monitoring and removing members of the EBAB.

29. Defendant David Knopf has been the CFO at Kraft Heinz since October 2017. Prior 

to his appointment as CFO, Knopf served as Vice President of Finance at Kraft Heinz since 2015. 

Prior to 2015, Defendant Knopf held various roles at 3G Capital (the owner of a substantial interest 

in Kraft Heinz) from 2013 to 2015. As CFO, Knopf had fiduciary responsibility for appointing, 

monitoring and removing members of the EBAB. 

30. Defendant Andrew Stoner has been Head of North American Business Services 

since August 2018 and a member of the EBAB since September 2015; he is a Plan fiduciary

pursuant to ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A), by virtue of having discretionary 

authority and control regarding the management of the Plan and/or the Plan’s assets.

31. Defendant Rishi Natarajan was the Treasurer of Kraft Heinz until he departed the 

Company in April 2018. Prior to his departure, he had also served as a member of the EBAB 

during the Class Period, and therefore was a Plan fiduciary pursuant to ERISA § 3(21)(A), 29 

U.S.C. § 1002(21)(A), by virtue of having discretionary authority and control regarding the 

management of the Plan and/or the Plan’s assets.

32. Defendant Yang Xu has been the Treasurer of Kraft Heinz since April 2018 and 

has also served since that time as a member of the EBAB, and is therefore a Plan fiduciary pursuant 

to ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A), by virtue of having discretionary authority and 

control regarding the management of the Plan and/or the Plan’s assets.

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33. Defendant James Liu was a Vice President of Strategic Growth at Kraft Heinz from 

November 2017 through March 2018, and prior to that was Vice President of Marketing for US 

Sauces and Condiments from July 2016 through November 2017. From June 2014 through July 

2016, Liu was a Vice President of Global Finance at Kraft Heinz with responsibilities in Treasury, 

Mergers and Acquisitions, and Strategic Planning. Until April 2018, he served as a member of the 

EBAB and so was a Plan fiduciary pursuant to ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A), by 

virtue of having discretionary authority and control regarding the management of the Plan and/or 

the Plan’s assets. In April 2018, he departed Kraft Heinz.Defendant Greg Guidotti was previously 

the Head of Marketing for Oscar Mayer at Kraft Heinz. Upon information and belief, before his 

recent departure from Kraft Heinz, he was a member of EBAB during the Class Period and 

therefore a Plan fiduciary pursuant to ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A), by virtue of 

having discretionary authority and control regarding the management of the Plan and/or the Plan’s 

assets. 

34. Defendant Christopher Skinger was the Principal Accounting Officer at Kraft 

Heinz until he left the Company in June 2018. He was also a member of the EBAB and therefore 

was a Plan fiduciary pursuant to ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A), by virtue of having 

discretionary authority and control regarding the management of the Plan and/or the Plan’s assets.

35. Defendant Vince Garlati has been the Principal Accounting Officer at Kraft Heinz 

since June 2018 and has also been a member of the EBAB since that time; accordingly, he is a 

Plan fiduciary pursuant to ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A), by virtue of having 

discretionary authority and control regarding the management of the Plan and/or the Plan’s assets.

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THE FIDUCIARY BREACHES

A. The Plan 

36. The Plan is a defined contribution retirement plan covered by ERISA covering 

eligible hourly and salaried employees actively employed by the Company. The Plan contains an 

employee stock option (“ESOP”) which permits participants to invest in Kraft Heinz common 

stock. Kraft Heinz also sponsors other defined contribution retirements plans that are also covered 

by ERISA and that also included a Kraft Heinz common stock investment option, including, 

without limitation, the Kraft Heinz Union Savings Plan; the Kraft Foods Group, Inc. TIP Plan; and 

the Kraft Foods Group, Inc. Thrift Plan.

37. The Plan and the other defined contribution retirement plans sponsored by Kraft 

Heinz are co-invested in a commingled investment fund known as the Kraft Heinz Defined 

Contribution Master Trust (the “Master Trust”) for which Fidelity Management Trust Company 

has served as the trustee since July 1, 2016. The funding of the Plan is made through employee

and Company contributions.

38. Pursuant to the Plan, the EBAB “is responsible for selecting the investment options 

in which participants elect to invest their Plan accounts, appointing investment managers to 

manage one or more of the investment options and monitoring the performance of the investment 

options.” In addition, the EBAB is responsible for the day-to-day administration and investment 

operations of the Plan as well as the non-investment operations of the Plan. 

39. According to the Charter of the EBAB, “[t]he primary function of the [EBAB] is 

to fulfull the fiduciary role of Plan Administrator for the U.S. employee benefit plans, as that term 

is defined by [ERISA] and provide oversight for the global benefit plans.” The Charter goes on to 

state that the “EBAB has full discretionary authority for administering the plans and overseeing 

the investment performance of the plans.”

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40. Despite its ability to delegate its powers under the Plan, the EBAB is still a fiduciary 

subject to ERISA, which forbids fiduciaries from offloading their duties onto others entirely. Thus, 

when the members of the EBAB became aware of the artificial inflation of Kraft Heinz’s stock 

price, and the concomitant harm to Plan participants that this inflation would cause, they were still 

obligated under ERISA to use what powers they had under the Plan to protect those participants 

from harm. 

41. The CEO and CFO of Kraft Heinz are responsible under the Plan for appointing 

and removing members of the EBAB. The EBAB Charter states that it “shall consist of at least 

six members who shall be appointed by the CEO and CFO, acting jointly. The appointment shall 

be for a fixed term at the discretion of the CEO and CFO, acting jointly, or until such member’s 

replacement is appointed and shall qualify.”

42. Among the obligations of the EBAB is to “[m]ake periodic reports to the CEO and 

CFRO and/or the Board of Directors of the Company ... for the purpose of fully informing the 

CEO and CFO and Board of the status and operations of the plans[.]” The EBAB is also 

responsible for “maintain[ing] plan documents and recommend[ing] amendments to employee 

benefit plans, for approval by the CEO and CFO, acting jointly[.]”

43. As senior corporate officers, Defendants who were members of the EBAB should 

have tried to cause to be disclosed, through the appropriate personnel, truthful or corrective 

disclosures to the public regarding, among other things, the true financial state of the Company 

and the Company’s impaired goodwill and intangible assets. These truthful or corrective 

disclosures, made in a timely fashion, would have addressed the artificial inflation of Kraft Heinz 

stock, Defendants’ fiduciary obligation to tell the truth to Plan participants, and would have cured 

the artificial inflation by making Kraft Heinz stock a prudent investment again. 

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44. As it happens, the fiduciaries responsible for monitoring the performance of the 

EBAB fiduciaries were the CEO and CFO of Kraft Heinz, who were also the two executives with 

primary responsibility for Kraft Heinz’s financial disclosures under the federal securities laws. 

Thus, the EBAB Defendants could have—and should have—entreated their fiduciary monitors, 

the CEO and CFO of Kraft Heinz, to effectuate corrective disclosure regarding the Company’s 

true financial state and impaired assets through those very securities-law disclosures.

B. The Merger

45. The Company is the result of the 2015 merger of the H. J. Heinz Company 

(“Heinz”) and Kraft Foods, Inc. (“Kraft”).

46. Heinz, founded in 1869, is an American food processing company based in 

Pittsburgh, Pennsylvania. Heinz manufactures thousands of food products in plants on six 

continents, and it markets these products in more than 200 countries and territories, including such 

well-known brands as Heinz Ketchup and Ore-Ida potato products. The company claims to own 

150 number-one or number-two brand names worldwide. In February 2013, Berkshire Hathaway 

and the Brazilian-American investment firm 3G Capital purchased Heinz for $23 billion.

47. Founded in 1909 as a door-to-door wholesale cheese business, Kraft Foods Inc. 

(“Kraft”) grew into an American multinational confectionery, food and beverage conglomerate. It 

has marketed many brands in more than 170 countries, twelve of which earn more than $1 billion 

worldwide annually, including Cadbury, Jacobs, Kraft, LU, Maxwell House, Milka, Nabisco, 

Oreo, Oscar Mayer, Philadelphia, Trident, and Tang. Kraft also owns such enduring brands as 

Kool-Aid, Jell-O, and Planters.

48. On March 25, 2015, Kraft announced a $36 billion merger with Heinz, arranged by 

Berkshire Hathaway and 3G Capital. The companies heralded the “significant synergy 

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opportunities” that would result from “combining Kraft’s brands with Heinz’s international 

platform” while promising to be “fully committed to maintaining an investment grade rating.” The 

resulting company was expected to have a market value of over $80 billion.

49. At the time the announcement of the merger, Warren Buffett, Chairman and CEO 

of Berkshire Hathaway said, “I am delighted to play a part in bringing these two winning 

companies and their iconic brands together. This is my kind of transaction, uniting two world-class 

organizations and delivering shareholder value. I’m excited by the opportunities for what this new 

combined organization will achieve.” 

50. The companies completed the merger of Heinz and Kraft on July 2, 2015, forming 

the Kraft Heinz Company, which is now the fifth largest food and beverage company in the world 

and the third largest in North America “with an unparalleled portfolio of iconic brands.” The new 

company employs nearly 39,000 employees in over 40 countries.

51. The press release announcing the completion of the merger touted the “the 

complementary nature of the two brand portfolios” and the “substantial opportunity for synergies.”

The press release describes the merger as an “historic transaction unit[ing] two powerful 

businesses and iconic brands, and provid[ing] a platform for leadership in the food industry both 

domestically and internationally.”

52. After the merger, Kraft Heinz was led by a group of executives that were, or had 

been, partners or former employees of 3G Capital, including Defendant Knopf, as well as Bernardo 

Hees, who had been a partner of 3G Capital since July 2010 and became Chief Executive Officer 

(“CEO”) of Kraft Heinz upon the closing of the merger, and Paulo Basilio, a partner of 3G Capital 

since 2012 who became EVP and CFO of Kraft Heinz and then US Zone President in 2017.

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C. Kraft Heinz’s False Disclosures and Financial Reports

53. On May 4, 2017, Kraft Heinz filed a Form 10-Q for the quarter ended April 1, 2017 

(the “1Q 2017 10-Q) with the SEC, which provided the Company’s first quarter 2017 financial 

results and position. The 1Q 2017 10-Q contained certifications pursuant to the Sarbanes-Oxley 

Act of 2002 (“SOX”) signed by CEO Hees and U.S. Zone President Basilio attesting to the 

accuracy of the financial reporting, the disclosure of any material changes to the Company’s 

internal controls over financial reporting, and the disclosure of all fraud.

54. The 1Q 2017 10-Q stated that Kraft Heinz had adequate internal controls and 

complied with SEC regulations, stating in pertinent part:

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and 

Chief Financial Officer, evaluated the effectiveness of our disclosure controls and 

procedures as of the end of the period covered by this report. Based on that 

evaluation, the Chief Executive Officers and Chief Financial Officer concluded 

that our disclosure controls and procedures as of the period covered by this 

report, were effective and provided reasonable assurance that the information 

required to be disclosed by us in reports filed or submitted under the Exchange 

Act is (i) recorded, processed, summarized, and reported within the time 

periods specified in the SEC’s rules and forms, and (ii) accumulated and 

communicated to our management, including the Chief Executive Officer and 

Chief Financial Officer, as appropriate to allow timely decisions regarding 

required disclosure.

Changes in Internal Control over Financial Reporting

Our Chief Executive Officer and Chief Financial Officer, with other 

members of management, evaluated the changes in our internal control over 

financial reporting during the three months ended April 1, 2017. We determined 

that there were no changes in our internal control over financial reporting 

during the three months ended April 1, 2017 that have materially affected, or 

are reasonably likely to materially affect our internal control over financial 

reporting.

(Emphasis added.)

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55. The Company filed a substantially similar 10-Q on August 4, 2017, for the quarter 

ended July 1, 2017 (the “2Q 2017 10-Q”) with the SEC, which provided the Company’s second 

quarter 2017 financial results and position. The 2Q 2017 10-Q contained signed SOX 

certifications by Hees and Basilio attesting to the accuracy of financial reporting, the disclosure of 

any material changes to the Company’s internal controls over financial reporting, and also stated 

that the Company had adequate internal controls and complied with SEC regulations during the 

second quarter of 2017.

56. On November 7, 2017, the Company filed a Form 10-Q for the quarter ended 

September 30, 2017 (the “3Q 2017 10-Q”) with the SEC, which provided the Company’s third 

quarter 2017 financial results and position. The 3Q 2017 10-Q contained signed SOX 

certifications by Defendants Hees and Basilio attesting to the accuracy of financial reporting and 

the disclosure of any material changes to the Company’s internal controls over financial reporting.

57. The 3Q 2017 10-Q stated that the Company’s internal controls were not effective

as of September 30, 2017 because of a misapplication of Accounting Standards Update 2016-15, 

an accounting standard which relates to Statement of Cash Flows, but failed to note any issues 

with its procurement area or its inflated goodwill and intangible assets stating, in pertinent part: 

Evaluation of Disclosure Controls and Procedures 

Our management, with the participation of our Chief Executive Officer and 

Chief Financial Officer, evaluated the effectiveness of our disclosure controls and 

procedures as of the end of the period covered by this report to determine if our 

disclosure controls and procedures as of the period covered by this report, were 

effective and provided reasonable assurance that the information required to be 

disclosed by us in reports filed or submitted under the Securities Exchange Act of 

1934 is (i) recorded, processed, summarized, and reported within the time periods 

specified in the SEC’s rules and forms, and (ii) accumulated and communicated to 

our management, including the Chief Executive Officer and Chief Financial 

Officer, as appropriate to allow timely decisions regarding required disclosure. 

Based on this evaluation, we concluded that our disclosure controls and procedures 

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were not effective as of September 30, 2017 due to the material weakness in 

internal control over financial reporting related to the misapplication of ASU 

2016-15, as described below.

Material Weakness in Internal Control over Financial Reporting 

A material weakness is a deficiency, or combination of deficiencies, in 

internal control over financial reporting, such that there is a reasonable possibility 

that a material misstatement of the Company’s annual or interim financial 

statements will not be prevented or detected on a timely basis. We did not maintain 

effective controls over the adoption of new accounting standards. Specifically, we 

did not maintain effective controls to evaluate and document the impact of new 

accounting standards, including communication with the appropriate individuals in 

coming to our conclusions on the application of new standards. 

This control deficiency resulted in the misstatement of our operating 

and investing cash flows and related financial disclosures, and in the 

restatement of our consolidated financial statements for the quarters ended 

April 1, 2017 and July 1, 2017, including the comparable prior periods.

Additionally, this control deficiency could result in a misstatement of the 

aforementioned account balances or disclosures that would result in a material 

misstatement to the annual or interim consolidated financial statements that would 

not be prevented or detected. Accordingly, our management has determined that 

this control deficiency constitutes a material weakness. 

Remediation of Material Weakness 

The remediation of this material weakness will primarily include steps to 

improve the evaluation and documentation of new accounting standards’ impacts 

and communication with the appropriate individuals. We plan to have these 

remediation steps in place during our 2017 fiscal year but will allow for testing to 

determine operating effectiveness before concluding on remediation. 

Changes in Internal Control over Financial Reporting 

Our Chief Executive Officer and Chief Financial Officer, with other 

members of management, evaluated the changes in our internal control over 

financial reporting during the three months ended September 30, 2017. We 

determined that there were no changes in our internal control over financial 

reporting during the three months ended September 30, 2017 that have 

materially affected, or are reasonably likely to materially affect, our internal 

control over financial reporting.

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(Emphasis added.) 

58. On February 2, 2018, the Company filed a Form 10-K for the year ended December 

30, 2017 (the “2017 10-K”) with the SEC, which provided the Company’s 2017 financial results 

and position. The 2017 10-K contained signed SOX certifications by Hees and Defendant Knopf 

attesting to the accuracy of financial reporting and the disclosure of any material changes to the 

Company’s internal controls over financial reporting.

59. The 2017 10-K stated that the Company had adequate internal controls and 

complied with SEC regulations, stating in pertinent part: 

Evaluation of Disclosure Controls and Procedures 

Our management, with the participation of our Chief Executive Officer and 

Chief Financial Officer, evaluated the effectiveness of our disclosure controls and 

procedures as of the end of the period covered by this report. Based on that 

evaluation, the Chief Executive Officer and Chief Financial Officer concluded 

that our disclosure controls and procedures as of the period covered by this 

report, were effective and provided reasonable assurance that the information 

required to be disclosed by us in reports filed or submitted under the Exchange 

Act is (i) recorded, processed, summarized, and reported within the time 

periods specified in the SEC’s rules and forms, and (ii) accumulated and 

communicated to our management, including the Chief Executive Officer and 

Chief Financial Officer, as appropriate to allow timely decisions regarding 

required disclosure. 

Remediation of Previously Disclosed Material Weakness 

A material weakness is a deficiency, or combination of deficiencies, in 

internal control over financial reporting, such that there is a reasonable possibility 

that a material misstatement of the Company’s annual or interim financial 

statements will not be prevented or detected on a timely basis. As previously 

disclosed concurrently with the filing of our Quarterly Report on Form 10-Q for 

the quarter ended September 30, 2017, we concluded that we had a material 

weakness in internal control over financial reporting related to the misapplication 

of Accounting Standards Update 2016-15. Specifically, we did not maintain 

effective controls over the adoption of new accounting standards, including 

communication with the appropriate individuals in coming to our conclusions on 

the application of new standards. Our management determined that the control 

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deficiency constituted a material weakness. During the fourth quarter of 2017, 

management implemented steps to improve the evaluation and documentation of 

new accounting standards’ impacts and communication with the appropriate 

individuals. 

Changes in Internal Control over Financial Reporting 

Our Chief Executive Officer and Chief Financial Officer, with other 

members of management, evaluated the changes in our internal control over 

financial reporting during the three months ended December 30, 2017. During the 

three months ended December 30, 2017, management implemented steps to 

improve the evaluation and documentation of new accounting standards’ impacts 

and communication with the appropriate individuals. These changes have been 

designed to ensure enhanced subject matter expert input in relation to new 

accounting standard pronouncements. We determined that, except for the 

remediation activities described above, there were no changes in our internal 

control over financial reporting during the three months ended December 30, 

2017 that have materially affected, or are reasonably likely to materially affect, 

our internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting 

Management is responsible for establishing and maintaining adequate 

internal control over financial reporting as defined in Rule 13a-15(f) under the 

Exchange Act. Our internal control over financial reporting is a process designed 

to provide reasonable assurance regarding the reliability of financial reporting and 

the preparation of financial statements for external reporting purposes in 

accordance with generally accepted accounting principles. Our internal control over 

financial reporting includes those written policies and procedures that: 

• pertain to the maintenance of records that, in reasonable detail, accurately 

and fairly reflect the transactions and dispositions of assets; 

• provide reasonable assurance that transactions are recorded as necessary 

to permit preparation of financial statements in accordance with generally 

accepted accounting principles; 

• provide reasonable assurance that receipts and expenditures are being 

made only in accordance with management and director authorization; and 

• provide reasonable assurance regarding prevention or timely detection of 

unauthorized acquisition, use or disposition of assets that could have a 

material effect on the consolidated financial statements. 

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Because of its inherent limitations, internal control over financial reporting 

may not prevent or detect misstatements. Also, projections of any evaluation of 

effectiveness to future periods are subject to the risk that controls may become 

inadequate because of changes in conditions, or that the degree of compliance with 

the policies or procedures may deteriorate. 

Management assessed the effectiveness of our internal control over 

financial reporting as of December 30, 2017. Management based this assessment 

on criteria described in Internal Control - Integrated Framework (2013) issued by 

the Committee of Sponsoring Organizations of the Treadway Commission 

(COSO). 

Based on this assessment, management determined that as of December 

30, 2017, we maintained effective internal control over financial reporting.

PricewaterhouseCoopers LLP, an independent registered public accounting firm, 

who audited the consolidated financial statements included in this Annual Report 

on Form 10-K, has also audited the effectiveness of our internal control over 

financial reporting as of December 30, 2017, as stated in their report which appears 

herein under Item 8. 

(Emphasis added.)

60. On May 3, 2018, the Company filed a Form 10-Q for the quarter ended March 31, 

2018 (the “1Q 2018 10-Q”) with the SEC, which provided the Company’s first quarter 2018 

financial results and position. The 1Q 2018 10-Q contained signed SOX certifications by Hees and 

Defendant Knopf attesting to the accuracy of financial reporting and the disclosure of any material 

changes to the Company’s internal controls over financial reporting.

61. The 1Q 2018 10-Q stated that the Company had adequate internal controls and 

complied with SEC regulations, stating in pertinent part:

Evaluation of Disclosure Controls and Procedures 

Our management, with the participation of our Chief Executive Officer and 

Chief Financial Officer, evaluated the effectiveness of our disclosure controls and 

procedures as of the end of the period covered by this report. Based on that 

evaluation, the Chief Executive Officer and Chief Financial Officer concluded 

that our disclosure controls and procedures, as of March 31, 2018, were 

effective and provided reasonable assurance that the information required to 

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be disclosed by us in reports filed or submitted under the Securities Exchange 

Act of 1934 is (i) recorded, processed, summarized, and reported within the 

time periods specified in the SEC’s rules and forms, and (ii) accumulated and 

communicated to our management, including the Chief Executive Officer and

Chief Financial Officer, as appropriate to allow timely decisions regarding 

required disclosure.

Changes in Internal Control over Financial Reporting 

Our Chief Executive Officer and Chief Financial Officer, with other 

members of management, evaluated the changes in our internal control over 

financial reporting during the three months ended March 31, 2018. We determined 

that there were no changes in our internal control over financial reporting 

during the three months ended March 31, 2018 that have materially affected, 

or are reasonably likely to materially affect, our internal control over financial 

reporting. 

(Emphasis added.) 

62. The 1Q 2018 10-Q stated that the Company was carrying $44,843 million in 

goodwill and $53,757 million in intangible assets, stating, in pertinent part, the following: 

We test goodwill for impairment at least annually in the second quarter or 

when a triggering event occurs. We performed our 2017 annual impairment test as 

of April 2, 2017. As a result of our 2017 annual impairment test, there was no 

impairment of goodwill. Each of our goodwill reporting units had excess fair value 

over its carrying value of at least 10% as of April 2, 2017. 

Our goodwill balance consists of 20 reporting units and had an aggregate 

carrying value of $44.8 billion as of March 31, 2018. As a majority of our goodwill 

was recently recorded in connection with business combinations that occurred in 

2015 and 2013, representing fair values as of the respective transaction dates, there 

was not a significant excess of fair values over carrying values as of April 2, 2017. 

We have a risk of future impairment to the extent that individual reporting unit 

performance does not meet our projections. Additionally, if our current 

assumptions and estimates, including projected revenues and income growth rates, 

terminal growth rates, competitive and consumer trends, market-based discount 

rates, and other market factors, are not met, or if valuation factors outside of our 

control change unfavorably, the estimated fair value of our goodwill could be 

adversely affected, leading to a potential impairment in the future. No events 

occurred during the period ended March 31, 2018 that indicated it was more likely 

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22

than not that our goodwill was impaired. There were no accumulated impairment 

losses to goodwill as of March 31, 2018.

* * *

We test indefinite-lived intangible assets for impairment at least annually in 

the second quarter or when a triggering event occurs. We performed our 2017 

annual impairment test as of April 2, 2017. As a result of our 2017 annual 

impairment test, we recognized a non-cash impairment loss of $49 million in 

SG&A in the second quarter of 2017. This loss was due to continued declines in 

nutritional beverages in India. The loss was recorded in our EMEA segment as the 

related trademark is owned by our Italian subsidiary. Each of our other brands had 

excess fair value over its carrying value of at least 10% as of April 2, 2017. 

Our indefinite-lived intangible assets primarily consist of a large number of 

individual brands and had an aggregate carrying value of $53.8 billion as of March 

31, 2018. As a majority of our indefinite-lived intangible assets were recently 

recorded in connection with business combinations that occurred in 2015 and 2013, 

representing fair values as of the respective transaction dates, there was not a 

significant excess of fair values over carrying values as of April 2, 2017. We have 

a risk of future impairment to the extent individual brand performance does not 

meet our projections. Additionally, if our current assumptions and estimates, 

including projected revenues and income growth rates, terminal growth rates, 

competitive and consumer trends, market-based discount rates, and other market 

factors, are not met, or if valuation factors outside of our control change 

unfavorably, the estimated fair values of our indefinite-lived intangible assets could 

be adversely affected, leading to potential impairments in the future. No events 

occurred during the period ended March 31, 2018 that indicated it was more likely 

than not that our indefinite-lived intangible assets were impaired.

63. On August 3, 2018, the Company filed a Form 10-Q for the quarter ended June 30, 

2018 (the “2Q 2018 10-Q”) with the SEC, which provided the Company’s second quarter 2018 

financial results and position. The 2Q 2018 10-Q contained signed SOX certifications by Hees and 

Defendant Knopf attesting to the accuracy of financial reporting and the disclosure of any material 

changes to the Company’s internal controls over financial reporting. 

64. The 2Q 2018 10-Q stated that the Company had adequate internal controls and 

complied with SEC regulations, stating in pertinent part:

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Evaluation of Disclosure Controls and Procedures 

Our management, with the participation of our Chief Executive Officer and 

Chief Financial Officer, evaluated the effectiveness of our disclosure controls and 

procedures as of the end of the period covered by this report. Based on that 

evaluation, the Chief Executive Officer and Chief Financial Officer concluded 

that our disclosure controls and procedures, as of June 30, 2018, were effective 

and provided reasonable assurance that the information required to be 

disclosed by us in reports filed or submitted under the Securities Exchange Act 

of 1934 is (i) recorded, processed, summarized, and reported within the time 

periods specified in the SEC’s rules and forms, and (ii) accumulated and 

communicated to our management, including the Chief Executive Officer and 

Chief Financial Officer, as appropriate to allow timely decisions regarding 

required disclosure.

Changes in Internal Control over Financial Reporting 

Our Chief Executive Officer and Chief Financial Officer, with other 

members of management, evaluated the changes in our internal control over 

financial reporting during the three months ended June 30, 2018. We determined 

that there were no changes in our internal control over financial reporting 

during the three months ended June 30, 2018 that have materially affected, or 

are reasonably likely to materially affect, our internal control over financial 

reporting.

(Emphasis added.) 

65. The 2Q 2018 10-Q stated that its goodwill and intangible assets numbered $44,270 

million and $53,379 million respectively, stating, in pertinent part, the following: 

Our goodwill balance consists of 20 reporting units and had an aggregate 

carrying value of $44.3 billion as of June 30, 2018. We test goodwill for impairment 

at least annually in the second quarter or when a triggering event occurs. We 

performed our 2018 annual impairment test as of April 1, 2018. As a result of our 

2018 annual impairment test, we recognized a non-cash impairment loss of $164 

million in SG&A related to our Australia and New Zealand reporting unit. This 

impairment loss was primarily due to margin declines in the region. The goodwill 

carrying value of this reporting unit was $509 million prior to its impairment. 

Additionally, we noted that four of our 20 reporting units each had excess fair value 

over its carrying value of less than 10%. As of the impairment test date, the 

goodwill carrying values associated with these reporting units were $4.7 billion for 

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24

Canada Retail, $424 million for Latin America Exports, $407 million for Northeast 

Asia, and $326 million for Southeast Asia. 

We generally utilize the discounted cash flow method under the income 

approach to estimate the fair value of our reporting units. Some of the more 

significant assumptions inherent in estimating the fair values include the estimated 

future annual net cash flows for each reporting unit (including net sales, cost of 

products sold, SG&A, working capital, and capital expenditures), income tax rates, 

and a discount rate that appropriately reflects the risk inherent in each future cash 

flow stream. We selected the assumptions used in the financial forecasts using 

historical data, supplemented by current and anticipated market conditions, 

estimated product category growth rates, management plans, and guideline 

companies. 

Fair value determinations require considerable judgment and are sensitive 

to changes in underlying assumptions, estimates, and market factors. Estimating the 

fair value of individual reporting units requires us to make assumptions and 

estimates regarding our future plans, as well as industry and economic conditions. 

If our current assumptions and estimates, including future annual net cash flows, 

income tax rates, and discount rates, are not met, or if valuation factors outside of 

our control change unfavorably, the estimated fair value of our goodwill could be 

adversely affected, leading to a potential impairment in the future. Additionally, as 

a majority of our goodwill was recorded in connection with business combinations 

that occurred in 2015 and 2013, representing fair values as of the respective 

transaction dates, those amounts are more susceptible to an impairment risk if 

business operating results or macroeconomic conditions deteriorate. 

Accumulated impairment losses to goodwill were $164 million at June 30, 

2018. There were no accumulated impairment losses to goodwill at December 30, 

2017. 

* * *

Our indefinite-lived intangible assets primarily consist of a large number of 

individual brands and had an aggregate carrying value of $53.4 billion as of June 

30, 2018. We test indefinite-lived intangible assets for impairment at least annually 

in the second quarter or when a triggering event occurs. We performed our 2018 

annual impairment test as of April 1, 2018. As a result of our 2018 annual 

impairment test, we recognized a non-cash impairment loss of $101 million in 

SG&A in the second quarter of 2018. This impairment loss was due to net sales and 

margin declines related to the Quero brand in Brazil. Additionally, as of April 1, 

2018, two brands (ABC and Smart Ones) each had excess fair value over its carrying 

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25

value of less than 10%. These brands had an aggregate carrying value of $665 

million as of April 1, 2018. 

As a result of our 2017 annual impairment testing, we recognized a noncash 

impairment loss of $48 million in SG&A in the second quarter of 2017. This loss 

was due to continued declines in nutritional beverages in India. The loss was 

recorded in our EMEA segment as the related trademark is owned by our Italian 

subsidiary. 

We generally utilize the excess earnings method under the income approach 

to estimate the fair value of certain of our largest brands. Some of the more 

significant assumptions inherent in estimating the fair values include the estimated 

future annual net cash flows for each brand (including net sales, cost of products 

sold, and SG&A), contributory asset charges, income tax considerations, a discount 

rate that reflects the level of risk associated with the future earnings attributable to 

the brand, and management’s intent to invest in the brand indefinitely. We selected 

the assumptions used in the financial forecasts using historical data, supplemented 

by current and anticipated market conditions, estimated product category growth 

rates, management plans, and guideline companies. 

We generally utilize the relief from royalty method under the income 

approach to estimate the fair value of our remaining brands. Some of the more 

significant assumptions inherent in estimating the fair values include the estimated 

future annual net sales for each brand, royalty rates (as a percentage of revenue that 

would hypothetically be charged by a licensor of the brand to an unrelated licensee), 

income tax considerations, a discount rate that reflects the level of risk associated 

with the future cost savings attributable to the brand, and management’s intent to 

invest in the brand indefinitely. We selected the assumptions used in the financial 

forecasts using historical data, supplemented by current and anticipated market 

conditions, estimated product category growth rates, management plans, and 

guideline companies. 

Fair value determinations require considerable judgment and are sensitive 

to changes in underlying assumptions, estimates, and market factors. Estimating the 

fair value of individual indefinite-lived intangible assets requires us to make 

assumptions and estimates regarding our future plans, as well as industry and 

economic conditions. If our current assumptions and estimates, including future 

annual net cash flows, royalty rates, contributory asset charges, income tax 

considerations, and discount rates, are not met, or if valuation factors outside of our 

control change unfavorably, the estimated fair values of our indefinite-lived 

intangible assets could be adversely affected, leading to potential impairments in 

the future. Additionally, as a majority of our indefinite-lived intangible assets were 

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26

recorded in connection with business combinations that occurred in 2015 and 2013, 

representing fair values as of the respective transaction dates, those amounts are 

more susceptible to an impairment risk if business operating results or 

macroeconomic conditions deteriorate.

66. On November 2, 2018, the Company filed a Form 10-Q for the quarter ended 

September 29, 2018 (the “3Q 2018 10-Q”) with the SEC, which provided the Company’s third 

quarter 2018 financial results and position. The 3Q 2018 10-Q contained signed SOX 

certifications by Hees and Defendant Knopf attesting to the accuracy of financial reporting and the 

disclosure of any material changes to the Company’s internal controls over financial reporting.

67. The 3Q 2018 10-Q stated that the Company had adequate internal controls 

and complied with SEC regulations, stating in pertinent part: 

Evaluation of Disclosure Controls and Procedures 

Our management, with the participation of our Chief Executive Officer and

Chief Financial Officer, evaluated the effectiveness of our disclosure controls and 

procedures as of the end of the period covered by this report. Based on that 

evaluation, the Chief Executive Officer and Chief Financial Officer concluded 

that our disclosure controls and procedures, as of September 29, 2018, were 

effective and provided reasonable assurance that the information required to 

be disclosed by us in reports filed or submitted under the Securities Exchange 

Act of 1934 is (i) recorded, processed, summarized, and reported within the 

time periods specified in the SEC’s rules and forms, and (ii) accumulated and 

communicated to our management, including the Chief Executive Officer and 

Chief Financial Officer, as appropriate to allow timely decisions regarding 

required disclosure. 

Changes in Internal Control over Financial Reporting 

Our Chief Executive Officer and Chief Financial Officer, with other 

members of management, evaluated the changes in our internal control over 

financial reporting during the three months ended September 29, 2018. We 

determined that there were no changes in our internal control over financial 

reporting during the three months ended September 29, 2018 that have 

materially affected, or are reasonably likely to materially affect, our internal 

control over financial reporting.

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(Emphasis added.) 

68. The 3Q 2018 10-Q stated that its goodwill and intangible assets numbered $44,308 

million and $53,038 million respectively, stating, in pertinent part, the following: 

Our goodwill balance consists of 20 reporting units and had an aggregate 

carrying value of $44.3 billion as of September 29, 2018. We test goodwill for 

impairment at least annually in the second quarter or when a triggering event 

occurs. We performed our 2018 annual impairment test as of April 1, 2018. As a 

result of our 2018 annual impairment test, we recognized a non-cash impairment 

loss of $164 million in SG&A related to our Australia and New Zealand reporting 

unit. This impairment loss was primarily due to margin declines in the region. The 

goodwill carrying value of this reporting unit was $509 million prior to its 

impairment. Additionally, five of our 20 reporting units each had excess fair value 

over its carrying value of less than 10%. As of the impairment test date, the 

goodwill carrying values associated with these reporting units were $4.7 billion for 

Canada Retail, $424 million for Latin America Exports, $407 million for Northeast 

Asia, $326 million for Southeast Asia, and $232 million for Other Latin America. 

We generally utilize the discounted cash flow method under the income 

approach to estimate the fair value of our reporting units. Some of the more 

significant assumptions inherent in estimating the fair values include the estimated 

future annual net cash flows for each reporting unit (including net sales, cost of 

products sold, SG&A, working capital, and capital expenditures), income tax rates, 

and a discount rate that appropriately reflects the risk inherent in each future cash 

flow stream. We selected the assumptions used in the financial forecasts using 

historical data, supplemented by current and anticipated market conditions, 

estimated product category growth rates, management plans, and guideline 

companies. Fair value determinations require considerable judgment and are 

sensitive to changes in underlying assumptions, estimates, and market factors. 

Estimating the fair value of individual reporting units requires us to make 

assumptions and estimates regarding our future plans, as well as industry and 

economic conditions. If our current assumptions and estimates, including future 

annual net cash flows, income tax rates, and discount rates, are not met, or if 

valuation factors outside of our control change unfavorably, the estimated fair value

of our goodwill could be adversely affected, leading to a potential impairment in 

the future. Additionally, as a majority of our goodwill was recorded in connection 

with business combinations that occurred in 2015 and 2013, representing fair values 

as of the respective transaction dates, those amounts are more susceptible to an 

impairment risk if business operating results or macroeconomic conditions 

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28

deteriorate. No events occurred during the period ended September 29, 2018 that 

indicated it was more likely than not that our goodwill was impaired. 

Accumulated impairment losses to goodwill were $164 million at 

September 29, 2018. There were no accumulated impairment losses to goodwill at 

December 30, 2017. 

* * *

Our indefinite-lived intangible assets primarily consist of a large number of 

individual brands and had an aggregate carrying value of $53.0 billion as of 

September 29, 2018. We test indefinite-lived intangible assets for impairment at 

least annually in the second quarter or when a triggering event occurs. We 

performed our 2018 annual impairment test as of April 1, 2018. As a result of our 

2018 annual impairment test, we recognized a non-cash impairment loss of $101 

million in SG&A in the second quarter of 2018. This impairment loss was due to 

net sales and margin declines related to the Quero brand in Brazil. Additionally, as 

of April 1, 2018, two brands (ABC and Smart Ones) each had excess fair value over 

its carrying value of less than 10%. These brands had an aggregate carrying value 

of $665 million as of April 1, 2018. 

In the third quarter of 2018, we recognized a non-cash impairment loss of 

$215 million in SG&A related to the Smart Ones brand. This impairment loss was 

primarily due to reduced future investment expectations and continued sales 

declines in the third quarter of 2018. We transferred the remaining carrying value 

of Smart Ones to definite-lived intangible assets. No events occurred during the 

period ended September 29, 2018 that indicated it was more likely than not that our 

other indefinite-lived intangible assets were impaired. As a result of our 2017 

annual impairment testing, we recognized a non-cash impairment loss of $48 

million in SG&A in the second quarter of 2017. This loss was due to continued 

declines in nutritional beverages in India. The loss was recorded in our EMEA 

segment as the related trademark is owned by an Italian subsidiary. We generally 

utilize the excess earnings method under the income approach to estimate the fair 

value of certain of our largest brands. Some of the more significant assumptions 

inherent in estimating the fair values include the estimated future annual net cash 

flows for each brand (including net sales, cost of products sold, and SG&A), 

contributory asset charges, income tax considerations, a discount rate that reflects 

the level of risk associated with the future earnings attributable to the brand, and 

management’s intent to invest in the brand indefinitely. We selected the 

assumptions used in the financial forecasts using historical data, supplemented by 

current and anticipated market conditions, estimated product category growth rates, 

management plans, and guideline companies. 

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29

We generally utilize the relief from royalty method under the income 

approach to estimate the fair value of our remaining brands. Some of the more 

significant assumptions inherent in estimating the fair values include the estimated 

future annual net sales for each brand, royalty rates (as a percentage of revenue that 

would hypothetically be charged by a licensor of the brand to an unrelated licensee), 

income tax considerations, a discount rate that reflects the level of risk associated 

with the future cost savings attributable to the brand, and management’s intent to 

invest in the brand indefinitely. We selected the assumptions used in the financial 

forecasts using historical data, supplemented by current and anticipated market 

conditions, estimated product category growth rates, management plans, and 

guideline companies. 

Fair value determinations require considerable judgment and are sensitive 

to changes in underlying assumptions, estimates, and market factors. Estimating the 

fair value of individual indefinite-lived intangible assets requires us to make 

assumptions and estimates regarding our future plans, as well as industry and 

economic conditions. If our current assumptions and estimates, including future 

annual net cash flows, royalty rates, contributory asset charges, income tax 

considerations, and discount rates, are not met, or if valuation factors outside of our 

control change unfavorably, the estimated fair values of our indefinite-lived 

intangible assets could be adversely affected, leading to potential impairments in 

the future. Additionally, as a majority of our indefinite-lived intangible assets were 

recorded in connection with business combinations that occurred in 2015 and 2013, 

representing fair values as of the respective transaction dates, those amounts are 

more susceptible to an impairment risk if business operating results or 

macroeconomic conditions deteriorate

69. Despite the Company’s positive public statements, behind the scenes, this highprofile merger with expectations to create long term shareholder value failed to deliver. From the 

start in 2015, the Kraft Heinz strategy centered on debt-driven acquisitions and harsh cost-cutting 

to create earnings growth. 

70. However, by the beginning of the Class Period, Defendants knew – or should have 

known – that cost-cutting measures had damaged the Company’s iconic brands and drained the 

Company of its resources.

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30

71. During the Class Period, the Company experienced significant sales declines in its 

legacy brands, such as Oscar Mayer and Kraft, as the tastes of a new generation of consumers 

switched to organic brands and small or private label alternatives. For example, during the Class 

Period, Defendants knew – or should have known – that the value of the Oscar Mayer trademark 

was impaired due to declining sales and decreases in market shares. Similarly, Defendants knew 

– or should have known – that value of the Kraft brand was likewise impaired by lagging sales and 

market share losses caused by lower priced and e-commerce retailers.

72. The damage done to Kraft Heinz was only unveiled to the public when, on February 

21, 2019, Kraft Heinz announced its earnings for the fourth quarter of 2018 and disclosed that the 

Company took an impairment charge of $15.4 billion to lower the carrying amount of goodwill in 

its U.S. Refrigerated and Canada Retail reporting units and the carrying amount of certain 

intangible assets, including the Kraft and Oscar Mayer trademarks. The impairment charge 

resulted in a net loss attributable to common shareholders of $12.6 billion and diluted loss per 

share of $10.34. 

73. The Company further publicly disclosed, for the first time on February 21, 2019, 

that Kraft Heinz had received a subpoena from the SEC in October 2018 in relation to the 

Company’s procurement function. As a result of the SEC investigation, the Company conducted 

its own internal investigation, which resulted in the Company recording a $25 million increase to 

costs of products sold, damaging the Company’s credibility and provoking fears of future 

accounting adjustments. 

74. On the same day, the Company announced a quarterly dividend of $0.40 per share, 

which represents a 36% reduction from the $0.625 quarterly dividend Kraft Heinz had been 

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31

paying. This reduction was designed to save the company $1 billion a year to help reduce longterm debt of $30.9 billion.

75. As a result of these disclosures, the price of Kraft Heinz common stock plummeted 

over 27% from $48.18 per share to $34.95 per share, erasing more than $16 billion of the 

Company’s market capitalization, thereby damaging the Plan and Plan participants invested in 

Kraft Heinz stock. 

76. However, Defendants knew, or should have known, that, as a result of the 2015 

merger, Kraft Heinz showed an inaccurate amount of goodwill and intangible assets on its books. 

77. For example, as of December 2017, the Company showed $44.8 billion in goodwill 

on its balance sheet, which was 37% of the Company’s total assets. Goodwill and intangible assets 

together represented a whopping 87% of the Company’s assets. As early as May 2017, analysts 

were questioning the amount of goodwill and intangible assets the Company was carrying yet no 

one at Kraft Heinz, including Defendants, attempted to correct the Company’s misleading public 

statements or to remedy the Company’s impaired goodwill and intangible assets that had 

artificially inflated Kraft Heinz’s stock price. 

78. Defendants breached their fiduciary duties under ERISA by allowing the Plan to 

continue investing in Kraft Heinz stock despite knowing that that the value of Kraft Heinz’s stock 

was artificially inflated.

79. Given the gravity of the disclosures made by Kraft Heinz on February 21, 2019, it 

is now clear that the statements referenced above artificially inflated the Company’s stock price 

because they failed to disclose that Kraft would be forced to write down a significant amount of 

goodwill and certain intangible assets in its Kraft and Oscar Mayer businesses and in its U.S. 

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Refrigerated and Canadian retail reporting units, and that Kraft’s internal controls, specifically 

with respect to its procurement area, were inadequate. 

80. These misstatements and Kraft Heinz’s failure to disclose material information to 

the public caused the market to improperly value the Company’s stock price. 

THE PLAN’S FIDUCIARY BREACHES: 

FIDUCIARY ACTION SHOULD HAVE BEEN TAKEN

81. Defendants are fiduciaries who owed Plan participants the duty to monitor and 

ensure the prudence of the Plans investments and to communicate truthfully with those to whom 

their duties were owed. Each Plan fiduciary had a continuing duty to monitor employee retirement 

funds in Kraft Heinz stock and to ensure that this investment remained a prudent option based on 

what each Plan fiduciary knew or should have known at the time. 

82. Throughout the Class Period, Defendants knew or should have known the truth 

about the Company’s artificially inflated stock price and should have tried to cause the Company 

to take corrective action with regard to the impaired goodwill and intangible assets and any false 

or misleading statements made by the Company. They knew or should have known that this nonpublic information was enormously material to the market, and that its concealment from the 

public would therefore cause Kraft Heinz’s stock to trade at an artificially high price, making the 

stock an imprudent investment for Plan participants. Yet, despite such knowledge, Defendants did 

nothing to protect the retirement savings of the Plan participants to whom they owed their fiduciary 

duties. 

83. The monitoring-fiduciary Defendants, CEO Hees and CFOs Basilio and then 

Knopf, were the SOX co-signatories of Kraft Heinz’s SEC filings, and, therefore knew or should 

have known about the Company’s misleading statements that artificially drove up the Company’s 

stock price. They were centrally involved in the preparation of the financial statements, including 

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with respect to monitoring the value of the Company’s goodwill and intangible assets. As senior 

executives and monitoring fiduciaries, Defendants Hees, Basilio and Knopf were well-positioned 

to know that Kraft Heinz had inaccurately represented its financial health to the public, and thus 

that Kraft Heinz stock was trading at an artificially inflated value, making it an imprudent 

investment for Plan participants. When Defendants Hees, Basilio and Knopf saw that those 

members of the EBAB with senior product or accounting responsibility were failing to act on the 

knowledge of Kraft Heinz stock’s artificial inflation and imprudence, they should have used their 

removal power as monitoring fiduciaries to remove those members from the EBAB and replaced 

them with individuals who would comply with their fiduciary duties and not allow Plan 

participants to be harmed by continued investment in an imprudent stock fund. 

84. Many members of the EBAB were also well-positioned to know that Kraft Heinz 

stock was materially overvalued and thus imprudent for Plan participants. Defendants Skinger 

and Garlati served as the most senior accounting officer of Kraft Heinz, and were therefore directly 

involved with, and responsible for, Kraft Heinz’s decisions regarding how to account for the 

Company’s various assets, including its goodwill and other intangibles. These Defendants knew 

or should have known that these assets were improperly and inaccurately accounted for and thus 

that material information regarding the true value of Kraft Heinz assets had been withheld from 

the public, causing Kraft Heinz to become artificially inflated and imprudent for Plan participants.

85. Similarly, Defendants Natarajan and Xu served as senior Treasury officers with 

intimate knowledge of Kraft Heinz’s finances and how its many assets, including its intangible 

assets, were valued. In light of their deep finance background and pivotal role in Kraft Heinz’s 

financial assessment, they knew or should have known that the public was being presented with a 

materially incomplete picture of Kraft Heinz’s value. 

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86. The same holds true for Defendants Stoner, Liu and Guidotti, whose senior 

marketing, finance and operational roles and responsibilities put them in a strong position to 

become aware of the misstatements regarding the Company’s goodwill and the value of the Kraft 

and Oscar Mayer brands as well as Kraft Heinz’s procurement function. As the marketing 

executive for sauces and condiments, Defendant Liu knew or should have known about the 

impairment of intangible assets involving Kraft and Oscar Mayer brands in this field. Likewise, 

Defendant Guidotti’s role as head of marketing for the Oscar Mayer brand put him in an ideal 

position to to know that the Oscar Mayer trademark was overvalued and to communicate this 

information to his colleagues on the EBAB. 

87. However, regardless of the precise position that the EBAB members held within 

the larger Kraft Heinz company, their membership on the EBAB required each of them to 

continuously monitor and investigate the prudence of investments in Kraft Heinz stock, to cause 

corrective disclosures to be made about Kraft Heinz and the value of its stock, and to communicate 

truthfully to Plan participants, to whom they owed the highest order of fiduciary duty.

88. Defendants were aware that Kraft Heinz stock was a popular Plan investment, and 

also aware that that popular investment had become an imprudent one, evidenced by how quickly 

the Company’s stock price plummeted once the truth became known. Yet Defendants did nothing 

to protect the retirement savings of the Plan participants.

A. Corrective Disclosures Should Have Been Made and Could Not Have Caused “More 

Harm Than Good”

89. Defendants had the power to cause corrective public disclosures to be made through

the Company’s SEC filings that would have corrected the stock’s artificially inflated price and 

ensured that Kraft Heinz stock was a prudent investment.

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90. Moreover, Defendants knew—or should have known—that disclosure of Kraft 

Heinz’s artificially inflated stock was inevitable. The only relevant question for Defendants should 

have been whether it would be better for Plan participants for the correction to occur sooner or 

later. Thus, the question was not whether the Defendants could prevent a stock drop due to Kraft 

Heinz’s concealment of material information, but when that drop would occur, and how severe it 

would be. Defendants should have recognized that the sooner they acted, the less severe the drop, 

and, therefore, the less harm to the Plan and to the Plan participants.

91. Defendants could have mitigated the damage done to Plan participants by causing 

corrective public disclosure at an earlier time. But as time went on, more Plan participants made 

purchases at artificially high prices, increasing the harm to Plan participants. As two experts 

framed the issue:

If the fraud occurs on one day at the beginning of the class period so 

that the gap between the value line and the price line appears 

immediately, the bias will be small because only investors who 

purchased the securities in the first few days of the class period are 

affected by the error. However, if the fraud consists of a series of 

omissions and misrepresentations so that the gap between the price 

line and the value line widens slowly, the inflation will be overstated 

for a much larger group of purchasers.

Bradford Cornell and R. Gregory Morgan, Using Finance Theory to Measure Damages in Fraud 

on the Market Cases, 37 UCLA L. Rev. 883, 911 (1990) (emphasis added). 

92. Defendants also needed to act to prevent future harm and damage to the Plan’s 

investment in Kraft Heinz stock. The Plan participants’ investment was at risk from a large stock 

price correction when the public learned the truth and realized that the Company had concealed 

material information regarding the value of Kraft Heinz’s goodwill and other intangibles. By 

failing to make corrective disclosures, the Defendants put the Plan participants’ investment in

Kraft Heinz stock at risk for a serious and lasting decline in value, and hurt management’s 

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credibility, and the long-term prospects of Kraft Heinz as an investment. This significant harm to 

the Plan could also have been prevented or mitigated by timely disclosure.

93. The eventual disclosure of the real value of Kraft Heinz’s goodwill and other 

intangibles was inevitable. The sheer size of the write-down that was ultimately taken – over $15 

billion in value – cannot simply be waved away. That kind of deterioration in value, particularly 

given the decline in sales experienced by the business lines primarily responsible for this 

deterioration, should not simply go unnoticed, especially by senior marketing and finance 

executives like Defendants.

94. As the Class Period went on, and the Company continued to profess the soundness 

of its internal controls and valuation of its intangibles, Defendants knew or should have known 

that these representations did not reflect reality. Then, as fiduciaries, they should have asked 

themselves: is it better to do nothing or to try to correct the artificial inflation – the imprudence –

of the Company’s stock?

95. Defendants should have considered whether taking no action at all was really a 

feasible alternative under these specific circumstances. The value of Kraft Heinz’s intangibles 

deteriorated consistently throughout the Class Period. How would they be able to keep that 

deterioration a secret? And once it came out, the Company’s stock price would decline 

accordingly.

96. By the beginning of the Class Period, the overvaluation of Kraft Heinz’s goodwill 

and other intangible assets was no longer theoretical or unproven; it was a known (or at least 

knowable) fact. Unlike in some cases, where a prudent fiduciary might reasonably want to 

investigate whether an investment has, in fact, become imprudent, the time for investigation had 

long since passed by the time of the Class Period. Thus, Defendants should have been focused on 

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trying to prevent further harm to Plan participants investing in that imprudent asset. They should 

have sought to prevent further purchases of imprudent stock at inflated prices, and they should 

have sought an earlier disclosure to enable a softer landing for the high-flying stock. The option 

of doing nothing and hoping the artificial inflation would somehow go away on its own was no 

longer on the table.

97. A company like Kraft Heinz can suffer real “reputational damage” from a 

prolonged period of artificially inflated stock that is significantly greater than any regulatory fines 

or other penalties that it may occur. See Jonathan M. Karpoff, D. Scott Lee and Gerald S. Martin, 

The Cost to Firms of Cooking the Books, Journal of Financial and Quantitative Analysis, Vol. 43, 

No. 3 (Sept. 2008). In fact, the reputational penalty is “7.5 times the sum of all penalties imposed 

through the legal and regulatory system” and “[f]or each dollar that a firm misleadingly inflates 

its market value, on average, it loses this dollar when its misconduct is revealed, plus an additional 

$3.08 . ... [of which] $2.71 is due to lost reputation.” Id. (emphasis added). This reputational 

damage increases the longer the public company’s stock is artificially high. Id.

98. Defendants’ inaction thus led to a much harsher price correction than was 

necessary, one that investors, including Plan participants, are still suffering the consequences of 

today. Defendants should have recognized that earlier disclosure was by far the less harmful 

option. 

99. Defendants could not have reasonably believed that effectuating truthful, corrective 

disclosure would do “more harm than good” to the Plan or its participants. While the Company 

disclosed that it performed annual goodwill impairment testing and, on occasion, wrote down 

relatively modest amounts of goodwill and intangible asset carrying costs, Defendants’ duty did 

not end with GAAP compliance. The point of performing periodic goodwill impairment testing is 

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to reckon with the possibility that the anticipated benefits of the 2015 merger of Kraft and Heinz 

may never be realized. To suggest that a fiduciary duty is satisfied by the mere acknowledgment 

that basic GAAP principles have been followed is to strip all substance out of the fiduciary 

appointment. 

100. The Plan participants were also deprived of the option of transferring their shares 

into one of the different, prudent investment alternatives under the Plan, which would have spared 

them from the greater losses when the stock correction took place. And over the long term, the 

failures to act by the Plan fiduciaries to expose corporate fraud is likely to have a chilling effect 

on future purchases of Kraft Heinz stock by Plan participants, whose trust in their employer is 

inevitably eroded by this malfeasance. Such an effect constitutes a net harm to the Plan.

101. Additionally, the issuance of a corrective disclosure was arguably required by the 

federal securities laws. By the very same mechanism that Kraft Heinz could have used to make 

corrective disclosures to the general public under the federal securities laws, it could also have 

made disclosures to Plan participants, because Plan participants are, after all, part of the general 

public. Defendants did not have to make a “special” disclosure only to Plan participants, but could 

simply have caused, through personnel with disclosure responsibilities – such as Defendants Hees, 

Basilio and Knopf – one corrective disclosure to be made to the world and thereby simultaneously 

satisfied its obligations under the federal securities laws and ERISA. 

102. And, even if Defendants determined that disclosure was not required by the 

securities laws, disclosure was certainly not prohibited by them. As discussed above, the truth’s 

emergence, and thus Kraft Heinz’s stock price correction, was inevitable. Thus, Defendants, in 

weighing harm versus good, should have concluded that even a disclosure not required by the 

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securities laws would, in this case, be less harmful than waiting for the disclosure to happen 

through some other mechanism. 

103. Millions of dollars were lost from the Plan participants’ retirement accounts.

Defendants are directly responsible for this enormous harm that its breaches of duty caused.

VII. CLASS ACTION ALLEGATIONS

104. Plaintiffs bring this action as a class action pursuant to Federal Rule of Procedure 

23(a), (b)(l) and/or (b)(2) on behalf of themselves and the following class of persons similarly 

situated (the “Class”):

All individuals, excluding defendants, who participated in the Plan 

and whose individual accounts purchased and/or held Kraft Heinz 

stock at any time between May 4, 2017, through February 21, 2019, 

inclusive, and who were damaged thereby.

105. Excluded from the Class are Defendants, the officers and directors of the Company, 

members of their immediate families and their legal representatives, heirs, successors or assigns 

and any entity in which defendants have or had a controlling interest.

106. The members of the Class are so numerous that joinder of all members is 

impracticable. While the exact number of Class members is unknown to plaintiffs at this time and 

can only be ascertained through appropriate discovery, Plaintiffs believe that there could be up to 

21,000 members in the proposed Class. Record owners and other members of the Class may be 

identified from records maintained by Kraft Heinz or the Plan and may be notified of the pendency 

of this action by mail, using the form of notice similar to that customarily used in securities class 

actions.

107. Plaintiffs’ claims are typical of the claims of the members of the Class as all 

members of the Class are similarly affected by Defendants’ wrongful conduct in violation of 

federal law complained of herein.

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108. Common questions of law and fact exist as to all members of the Class and 

predominate over any questions solely affecting individual members of the Class. Among the 

questions of law and fact common to the Class are:

a. Whether Defendants each owed a fiduciary duty to the Plan, to Plaintiffs and to 

members of the Class;

b. Whether Defendants breached fiduciary duties owed to the Plan, to Plaintiffs and 

to members of the Class by failing to act prudently and solely in the interests of the 

Plan and the Plan’s participants and beneficiaries;

c. Whether Defendants failed to provide sufficient material disclosure to any and all 

Plan fiduciaries;

d. Whether Defendants violated ERISA; and

e. The extent to which Class members have sustained damages and the proper 

measure of those damages.

109. Plaintiffs’ claims are typical of the claims of the members of the Class because 

Plaintiffs and the other members of the Class each sustained damages or were negatively affected 

by Defendants’ wrongful conduct in violation of ERISA as complained of herein.

110. Plaintiffs will fairly and adequately protect the interests of the members of the Class 

and have retained counsel highly competent and experienced in class action and complex litigation, 

including actions involving ERISA plans. Plaintiffs have no interest antagonistic to or in conflict 

with those of the Class.

111. Class action status in this ERISA action is warranted under Rule 23(b)(1)(B) 

because this action is also brought on behalf of the Plan, and any prosecution of separate actions 

by the members of the Class would create a risk of adjudications with respect to the Plan which 

would, as a practical matter, be dispositive of the interests of the other members not parties to the 

actions, or substantially impair or impede their ability to protect their interests.

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112. Class action status is also warranted under the other subsections of Rule 23(b) 

because: (i) prosecution of separate actions by the members of the Class would create a risk of 

establishing incompatible standards of conduct for Defendants; (ii) Defendants have acted or 

refused to act on grounds generally applicable to the Class, thereby making appropriate final 

injunctive, declaratory or other appropriate equitable relief with respect to the Class as a whole.

113. Plaintiffs also bring this action on behalf of the Plan pursuant to ERISA §§ 409(a), 

502(a)(2), 29 U.S.C. §§ 1109(a), 1132(a)(2).

COUNT I

Failure to Prudently and Loyally Manage the Plan’s Assets

(Against Defendants EBAB, Stoner, Natarajan, Xu, Liu, Guidotti, Skinger and Garlati)

114. Plaintiffs incorporate the allegations contained in the previous paragraphs of this 

Complaint as if fully set forth herein.

115. At all relevant times, as alleged above, all Defendants were fiduciaries within the 

meaning of ERISA § 3(21)(a), 29 U.S.C. § 1002(21)(A) in that they exercised discretionary 

authority or control over the administration and/or management of the Plan or disposition of the 

Plan’s assets.

116. Under ERISA, fiduciaries who exercise discretionary authority or control over 

management of a plan or disposition of a plan’s assets are responsible for ensuring that investment 

options made available to participants under a plan are prudent. Furthermore, such fiduciaries are 

responsible for ensuring that all investments in the Company’s stock in the Plan were prudent and 

that such investment was consistent with the purpose of the Plan. Defendants are liable for losses 

incurred as a result of such investments being imprudent.

117. A fiduciary’s duties of loyalty and prudence require it to disregard plan documents 

or directives that it knows or reasonably should have known would lead to an imprudent result or 

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would otherwise harm plan participants or beneficiaries. ERISA § 404(a)(l)(D), 29 U.S.C. § 

1104(a)(l)(D). Thus, a fiduciary may not blindly follow plan documents or directives that would 

lead to an imprudent result or that would harm plan participants or beneficiaries, nor may it allow 

others, including those whom they direct or who are directed by the plans, including plan trustees, 

to do so.

118. Defendants’ duties of loyalty and prudence also obligate them to speak truthfully 

to participants, not to mislead them regarding the Plan or its assets, and to disclose information 

that Plan participants need in order to exercise their rights and interests under the Plan. This duty 

to inform participants includes an obligation to provide participants and beneficiaries of the Plan 

with complete and accurate information, and to refrain from providing inaccurate or misleading 

information, or concealing material information, regarding the Plan’s investments and investment 

options such that the Plan participants can make informed decisions with regard to the prudence

of investing in such options made under the Plan.

119. Defendants breached their duties to prudently and loyally manage the Plan’s assets. 

During the Class Period, Defendants knew or should have known that Kraft Heinz stock had 

become an imprudent investment for Plan participants’ retirement savings because there was false 

and misleading material information given to Plan participants and the public about the stock that

artificially inflated its value. 

120. Accordingly, Defendants should have taken appropriate responsive action by trying 

to effectuate, through personnel with disclosure responsibilities, corrective public disclosures to 

cure the artificial inflation, correct the stock price, and render Kraft Heinz stock a prudent 

investment again. As such, between May 4, 2017, through February 21, 2019, Plan participants 

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could not appreciate the true risks presented by investments in Kraft Heinz’s stock and, therefore, 

could not make informed decisions regarding their investments.

121. As a direct and proximate result of the breaches of fiduciary duties alleged herein, 

the Plan, and indirectly Plaintiffs and other Plan participants and the other members of the Class, 

suffered foreseeable damage to or lost a significant portion of their retirement investments. 

Pursuant to ERISA § 502(a), 29 U.S.C. § 1132(a) and ERISA § 409, 29 U.S.C. § 1109(a), 

Defendants are liable to restore the losses to the Plan caused by their breaches of fiduciary duties.

COUNT II

Failure to Monitor

(Against Defendants Hees, Basilio and Knopf)

122. Plaintiffs incorporate the allegations contained in the previous paragraphs of this 

Complaint as if fully set forth herein.

123. At all relevant times, as alleged above, Defendants Hees, Basilio and Knopf were

fiduciaries within the meaning of ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A).

124. At all relevant times, as alleged above, the scope of the fiduciary responsibility of 

Defendants Hees, Basilio and Knopf included the responsibility to appoint, evaluate, and monitor 

other Plan fiduciaries, including, but not limited to, any person or persons to whom certain 

fiduciary responsibilities were at least partially delegated.

125. These Defendants’ fiduciary duties entailed ensuring that these other Plan 

fiduciaries each had truthful and accurate information to fulfill their respective jobs and duties as 

fiduciaries and to properly monitor, evaluate and oversee the Plan’s investment in Kraft Heinz 

stock. 

126. Under ERISA, a monitoring and appointing fiduciary must ensure that those 

fiduciaries whom he is obligated to monitor are complying with their fiduciary duties. If a 

monitoring and appointing fiduciary learns that one of the fiduciaries he is overseeing is breaching 

a fiduciary duty, the monitoring and appointing fiduciary must take action permitted him under 

the Plan and ERISA to prevent this breach of fiduciary duty from continuing unchecked.

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127. Here, Defendants Hees, Basilio and Knopf had the power under the Plan to remove 

members of the EBAB who breached their fiduciary duties. Thus, when Defendants Hees, Basilio 

and Knopf became aware that members of the EBAB were allowing Plan participants to be harmed 

by the continued investment of their retirement funds in an imprudent, artificially inflated ESOP, 

Defendants Hees, Basilio and Knopf should have used their removal powers to remove those 

individuals from the EBAB. Their failure to do so directly and proximately caused the Plan, and 

indirectly Plaintiffs and other Plan participants, foreseeable damage to and/or losses of a 

significant portion of their retirement investments. 

128. Pursuant to ERISA § 502(a), 29 U.S.C. § 1132(a) and ERISA § 409, 29 U.S.C. § 

1109(a), Defendants Hees, Basilio and Knopf are liable to restore the losses to the Plan caused by 

their breach of fiduciary duty.

PRAYER FOR RELIEF

WHEREFORE, Plaintiffs pray for:

A. Determination that the instant action may be maintained as a class action under 

Rule 23, Federal Rules of Civil Procedure, appointing Plaintiffs as class representatives, and 

determining that Plaintiffs’ counsel satisfies the prerequisites of Rule 23(g);

B. Declaration that Defendants breached ERISA fiduciary duties owed to the Plan and 

its participants;

C. An Order compelling Defendants to make good to the Plan all losses to the Plan

resulting from Defendants’ breaches of their fiduciary duties, including losses to the Plan resulting 

from imprudent investment of the Plan’s assets, to restore to the Plan all profits Defendants made 

through use of the Plan’s assets, and to restore to the Plan all profits that the participants would 

have made if Defendants had fulfilled their fiduciary obligations;

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D. Imposition of a Constructive Trust on any amounts by which Defendants were 

unjustly enriched at the expense of the Plan as the result of breaches of fiduciary duty;

E. An Order enjoining Defendants from any further violations of their ERISA 

fiduciary obligations;

F. Actual damages in the amount of any losses the Plan suffered, to be allocated 

among the participants’ individual accounts in proportion to the accounts’ losses including the lost 

opportunity costs;

G. An Order that Defendants allocate the Plan’s recovery to the accounts of all 

participants who had any portion of their account balances invested in Kraft Heinz stock in 

proportion to the accounts’ losses attributable to the decline in the price of its stock or the value of 

investment in alternative options under the Plan.

H. Awarding the Plan or Plan participants rescission or money damages including prejudgment interest;

I. An Order awarding costs pursuant to 29 U.S.C. § 1132(g);

J. An Order awarding attorneys’ fees pursuant to 29 U.S.C. § 1132(g) and the 

common fund doctrine; and

K. An Order for equitable restitution and other appropriate equitable monetary relief 

against defendants.

L. Such other and further relief the Court deems just and equitable.

DEMAND FOR JURY TRIAL

Plaintiffs and the Class request a jury trial for any and all Counts for which a trial by jury 

is permitted by law.

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Dated: June 28, 2019 By: /s/ Jason Archinaco__ ________

 Jason Archinaco

THE ARCHINACO FIRM

Jason Archinaco

1100 Liberty Avenue

Suite C-6

Pittsburgh, PA 15222

Telephone: (412) 434-0555

Facsimile: (888) 563-7549

Email: jarchinaco@archlawgroup.com

ZAMANSKY LLC

Samuel E. Bonderoff (admitted pro hac vice)

Jacob H. Zamansky (admitted pro hac vice)

James Ostaszewski (admitted pro hac vice)

50 Broadway, 32nd Floor

New York, NY 10004

Telephone: (212) 742-1414

Facsimile: (212) 742-1177

Email: samuel@zamansky.com 

SCHNEIDER WALLACE

COTTRELL KONECKY WOTKYNS LLP

Todd M. Schneider*

Kyle G. Bates*

James A. Bloom*

2000 Powell Street, Suite 1400

Emeryville, CA 94608

Telephone: (415) 421-7100

Facsimile: (415) 421-7105

tschneider@schneiderwallace.com

kbates@schneiderwallace.com

jbloom@schneiderwallace.com

*Pro Hac Vice application forthcoming

COUNSEL FOR PLAINTIFFS AND 

THE PUTATIVE CLASS

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