Hampshire announces completion of internal investigation

01 Jun '07
4 min read

Hampshire Group Limited announced that it has filed an amended annual report on Form 10-K/A including its restated financial statements for the three year period ended December 31, 2005 with the United States Securities and Exchange Commission.

The Company has restated its historical financial statements to reflect the results of the investigation initiated by the Audit Committee of its Board of Directors and recorded a cumulative charge of approximately $7,698,000 to retained earnings for the periods restated. The total reductions to net income as a result of the findings were approximately $1,384,000, $2,441,000, and $1,904,000 for the fiscal years ended December 31, 2005, 2004, and 2003, respectively, and $1,969,000 to earnings prior to 2003. This press release should be read in conjunction with the Form 10-K/A referred to in this release.

As previously disclosed, the Company announced on June 22, 2006 that the Audit Committee commenced an investigation related to, among other things, the misuse and misappropriation of assets for personal benefit, certain related party transactions, tax reporting, internal control deficiencies and financial reporting and accounting for expense reimbursements, in each case involving certain members of the Company's senior management.

The Audit Committee retained Paul, Weiss, Rifkind, Wharton & Garrison, LLP to conduct the investigation. Pending the outcome of the investigation, the Board placed Ludwig Kuttner, the Company's Chief Executive Officer; Charles Clayton, the Company's Executive Vice President, Treasurer and former Chief Financial Officer; Roger Clark, the Company's Vice President of Finance and Principal Accounting Officer; and two personal assistants on administrative leave.

On September 25, 2006, the Company announced that it had terminated the employment of Mr. Kuttner as a result of findings indicating that Mr. Kuttner had submitted expense reports to the Company for approximately $1,450,000 covering approximately 10 years, a substantial portion of which were fraudulent or not substantiated in accordance with Company policy among other reasons. The Board of Directors also terminated the employment of Mr. Clayton on that date.

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