NEWS- Terminated: Hampshire fires Ludwig Kuttner
Three months after sweater manufacturer the Hampshire Group placed its CEO, Ludwig Kuttner, on administrative leave pending a financial investigation, the company has fired him and two other top executives, claiming Kuttner bilked the company out of more than $1 million.
Kuttner, who splits his time between homes in Manhattan and Charlottesville, was unavailable for comment at press time. Hampshire Group spokesperson Chris Kittredge also declined comment on the investigation beyond the information in a September 25 press release which states, "Among other issues still being reviewed, Mr Kuttner submitted expense reports for approximately $1.45 million over a period of approximately 10 years, a substantial portion of which were fraudulent or not substantiated in accordance with company policy."
The announcement comes as a surprise to some local folks who know Kuttner.
"From my experience, Ludwig has been very forthright, and did everything he ever promised on a handshake," says Edwin Stalzer, Kuttner's business partner in local companies Batteries Plus and Virginia Electronic Component.
Kuttner's son, downtown developer Oliver Kuttner, also comes to his father's defense. "I don't see him being a crook," he says.
And indeed, one stockmarket expert says the investigation findings don't necessarily mean Kuttner has done anything dishonest– he could just be disorganized. Compared to the hundreds of millions of dollars mishandled in corporate scandals such as Enron and WorldCom, the alleged missing money from the Hampshire Group is pocket change.
"$1.5 million over 10 years for a CEO of a major publicly traded company could simply be failure to keep good accounting records of a few trips on the corporate jet each year," says financial analyst David Marotta. And because of new record-keeping legislation enacted in the wake of those huge corporate scandals, Marotta says, "An honest CEO can be convicted today simply for failing to keep precise accounting records."
Another of Kuttner's local business associates, Richard Spurzem, says financial discrepancies could be explained by a corporate jet– if there'd been one.
"He was downright cheap when he flew coach all over the place," says Spurzem. "His board offered to get him a private jet," Spurzem adds, but Kuttner declined. "He could have easily spent a million or more a year just on flying around," Spurzem says.
Marotta believes Kuttner may be the company's "scapegoat," and Spurzem concurs.
"When people like you they pay you lots of money," he says, citing Kuttner's $2 million annual paycheck from Hampshire. "And when, for some reason, someone doesn't like you, now they're going to go for every little thing tooth and nail."
The younger Kuttner says his father is "in good spirits," despite dealing with the frustration of being fired publicly from a company he helped build over 25 years, both as a chairman of the board and CEO. But losing his job isn't the elder Kuttner's only problem. As Hampshire's largest individual shareholder with approximately 30 percent of the company's stock, Kuttner is also losing his money.
Hampshire stock has been tumbling since January, when it peaked at $24 a share, dropping to $15.21 by June 27, after the investigation was announced. Despite rebounding to $16.58 on August 17, by October 3 it was trading at $12.40, nearly a 50 percent loss since the beginning of the year, and for Kuttner, a personal loss of millions of dollars.
And more rocky roads may still be ahead for Kuttner and the company.
On July 18, Hampshire Group shareholder Mary Hazelton filed a suit in South Carolina federal court alleging that Kuttner, five other company 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.
The defendants filed motions to dismiss on September 26, which are pending. On August 17, Nasdaq notified Hampshire that it could be subject to delisting after failing to file its quarterly report on time. And Kuttner hit the company that same day, filing 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.
The company has vowed to "contest vigorously" Kuttner's claim.
Former Hampshire Group CEO Ludwig Kuttner
PHOTO COURTESY PATRICKMCMULLAN.COM