By  on May 11, 1994

WASHINGTON -- Cygne Designs Inc., New York, which makes private label apparel for Ann Taylor and The Limited, is under investigation by the Securities and Exchange Commission for possible insider trading, according to the company's registration statement for a secondary stock offering.

The stock in question was traded prior to Cygne's Sept. 29 announcement that it had agreed to acquire FWM, another apparel design and production concern. The acquisition was completed last month.

"The company is cooperating with the commission's investigation, and certain executive officers of the company have, at the request of the commission, agreed to give testimony," the statement said.

The company would not speculate on the outcome of the investigation because it is in a preliminary stage, the filing said. A call to the company was not returned Tuesday. An SEC spokesman would not comment.

Cygne's stock more than doubled in price in less than two years. In June 1993, three stockholders -- chairman and chief executive officer Bernard M. Manuel, vice chairman and president Irving Benson, and CIL, an affiliate of company director Chikara Sasaki -- sold 765,000 shares at $8 each to The Limited Direct Associates L.P., described in the filing as "a limited partnership consisting of a wholly owned subsidiary and certain operating divisions of The Limited Inc."

Two months later, Cygne sold 2.76 million shares for $10 each in an initial public offering. During the quarter ended May 5, shares traded at $20.75 to $22.75, according to the filing. The proposed maximum offering price per share of the secondary offering announced Tuesday is $20.82.

In acquiring FWM, Cygne exchanged 2 million unregistered shares, which at the time carried a market value of $44 million.

The filing also noted that FWM's federal tax returns are under scrutiny both in the U.S. and abroad.

FWM's 1983-1990 income tax returns were recently audited by the Internal Revenue Service, it said. "After extensive discussion with the IRS, FWM has received a proposed settlement agreement" to pay an interest charge of $235,000, but no other penalty.

As a result of the acquisition by Cygne, FWM's use of net operating losses "will be significantly restricted," the filing said. The proposed settlement, which still must be approved by the federal Joint Committee of Taxation, would reduce FWM's net operating loss carryforward as of the end of 1990 to $1.3 million from $28 million.

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