Attorneys said the response is not due until April 29. Last month, Hampshire sued Kuttner and two other officers, former executive vice president and treasurer Charles Clayton and former vice president of finance Roger Clark, in the Delaware Court of Chancery. They were charged with fraud, mismanagement and tax evasion that Hampshire claimed subjected it to serious financial and legal risk.
Kuttner, 60, owns 31.1 percent of the Hampshire Group stock. He left the company in 2006 after Hampshire suspended his employment. Kuttner is still a member of the board, and last year received total compensation of $723,496, according to a regulatory filing with the Securities and Exchange Commission. The company was delisted from the Nasdaq on Jan. 19, 2007, and now trades on Pink Sheets as HAMP.PK.
In the lawsuit filed on March 7, Hampshire asked the court for damages plus interest and costs stemming from the executives' alleged wrongdoing, as determined at trial. The company claimed $11 million in financial harm just from its investigation alone of the three men, which began in June 2006, when some executives reported irregularities to the board's audit committee. Hampshire Group said in August that the company had been advised that the SEC was also conducting an investigation and that it had also been contacted by the U.S. Attorney's office.
In addition to the cost of its probe, the company said there was a restatement and relisting cost of $1 million; a reimbursement for fraudulent and unsubstantiated expenses of $1.4 million; unspecified costs related to Hampshire's tax liability and penalties, and for charitable donations made to avoid paying taxes. Finally, the three former executives were charged with awarding themselves $7.2 million in unjustified bonuses.
Kuttner, with the help of Clayton and Clark, "engaged in a pattern of misconduct over many years to take fraudulently money from the company and to deny the government taxes that were duly owed, thereby enriching himself and putting the company and its many loyal employees at serious legal and financial risk," court papers said.