NEWS-Sweat(er)ing bullets: Woes worsen for Hampshire, Kuttner

When the Hampshire Group Ltd. placed its Charlottesville- and New York-based CEO and president, Ludwig Kuttner, on administrative leave in late June pending an investigation into improper business practices, investors were nervous. But now stockholders in the sweater manufacturer have even more reason to sweat, and it's not because they've donned their own products mid-summer.

On Thursday, August 17, Hampshire announced that its failure to file a quarterly report by the July 1 deadline could have serious repercussions. On August 14, the Nasdaq stock exchange informed the company that it was subject to delisting on the Nasdaq Global Market, a situation that experts say could devastate the company and its investors' ability to buy or sell shares.

"In a company that's becoming delisted, usually there are internal problems and investors who want to get out," says Charlottesville financial planner David Marotta, who adds that because a delisted company doesn't have a public price set, "Who knows what it's worth?"

Hampshire has requested a hearing before Nasdaq's Listing Qualifications Panel, and is waiting to hear whether that request will be granted, says Hampshire spokesperson Victoria Hofstad. An SEC filing by Hampshire, however, reveals the success of that appeal is not a sure bet.

"There can be no assurance that the Listing Qualifications Panel will grant the Company's request for continued listing," the documents warn.

The Nasdaq notification isn't the only bad news for Hampshire. In fact, the same day it announced the threat of delisting, the company received notice that Kuttner has filed a "demand for arbitration" with the American Arbitration Association. 

Kuttner claims that by placing him on administrative leave in late June, the company "effectively terminated" his employment without cause. He's asking for $7.5 million in unpaid compensation including salary, bonuses, and expenses, a termination benefit, and continued insurance coverage.

Hofstad declines comment on Kuttner's claim, pointing to the SEC filing's wording: "The company intends to contest vigorously the claim."

Kuttner's claim isn't the only one the company is contesting. A lawsuit filed July 18 in South Carolina by disgruntled Hampshire investor Mary Hazelton alleges Kuttner, five other Hampshire Group executives, and the company itself issued "false and misleading statements," and that "violations of law" committed by the company have caused hundreds of millions of dollars in lost revenue. Marotta says the allegations in Hazelton's suit are serious.

"Directors have a primary responsibilty to put shareholder interests first, and that's a legally binding requirement," he says. If Kuttner and the other directors shirked that responsibility, he says, "That's when they get the handcuffs out and lead people away for not fulfilling their fiduciary roles."

Kuttner left a message in response to Hook's calls for comment on Tuesday, but he could not be reached by presstime later that day. However, several locals came to his defense when his administrative leave was announced.

"Ludwig Kuttner does not deserve this public humiliation," said Edwin Stalzer, president of VEC, an electric supply warehouse Kuttner has financially backed. And– contrary to the Hampshire board's allegation that Kuttner used company time for outside pursuits– Stalzer says that Kuttner carefully reserved nights and weekends to talk to Stalzer about VEC and Batteries Plus, another of their ventures.

"Ludwig lives in the same house since he was in his twenties and came to this country after successfully developing real estate in Germany," says Richard Spurzem, another Kuttner business partner, in a recent letter.

"I think my father is very, very smart, a very hardworker," said son Oliver Kuttner, a real estate developer, back in June. "I don't see him being a crook; I really don't. I know that when we came over to this country, my father took over a company that was destined to be closed." 

Reached last week, the younger Kuttner said he was unaware of the more recent developments, and that he stands behind his earlier comments supporting his father.

A manufacturer of sweaters, the Hampshire Group was formed from two unrelated firms in 1977 and went public in 1992, according to its website. Ludwig Kuttner "fought very hard trying to not have the company go under the way a lot of textile companies did," said the younger Kuttner.

The company stock value had dropped by 30 percent between January and early summer, and last week's announcements preceded further slippage. After trading at $16.58 on August 17, the stock was trading at $15.50 at press time Tuesday, a 6.5 percent drop. But during the last five years under Kuttner, the stock had quintupled from approximately $5 per share in late 2001 to a high of $24 per share in January 2006.

Oliver Kuttner says such long-term improvement reveals his father's dedication to the shareholders. "That doesn't happen by accident," says the younger Kuttner. "He must have done something to run a company in a fairly profitable fashion."



I've met and spoke with Ludwig Kuttner on several occasions. I've also met his wife, Beatrice and his son's Oliver, Daniel and Fabian. The whole family is amazingly open, supportive, generous to a fault and their counsel, advice and direction has always been something I treasure. I am very saddened by what has happened at Hampshire Group and am sure that due to Ludwigs diligence and intelligence that he will have no problem recovering from this set back.

I am very saddened by what has happened with Ludwig Kuttner former CEO or Hampshire Group Ltd. In 1985 he generously helped our company with a considerable amount of money to develop the Thrombostat system. This system now under the name of PFA-100 (Baxter, Dade-Behring, Siemens) on the market saves around 100.000 patients per year from live threatening bleeding. Money is not everything and Hampshire could have settled the case without dramatic damage to the shareholders. What is more important: Hampshire Group Ltd. has lost an intelligent, experienced and hard working CEO.