By  on October 22, 2008

A federal judge last week approved a $16 million settlement in a class-action lawsuit brought against Tommy Hilfiger Corp. by stockholders in the wake of a federal tax probe in 2004.

The cash settlement will go to shareholders who purchased common stock of the company between Nov. 3, 1999, and Sept. 24, 2004. Judge Shira A. Scheindlin gave final approval to the settlement in a judgment signed Oct. 15 in U.S. District Court in Manhattan.

The multimillion-dollar judgment applies to at least nine related complaints filed in 2004 after the company revealed it was the target of a tax investigation by the U.S. Attorney’s office regarding its overseas buying office commission rate from 1990 to 2004. The suits alleged that the rate was part of a concealed transfer pricing and tax scheme that led stock of Tommy Hilfiger Corp. to trade at artificially inflated prices and that the company had issued financial statements that were misleading.

Federal prosecutors dropped the probe in August 2005 after Tommy Hilfiger Corp. agreed to pay $18.1 million in additional federal taxes and interest.

According to court documents, the defendants in the various civil suits, which included senior management such as former chief executive officer David Dyer and Tommy Hilfiger himself in some, denied all claims against them. They cited a desire to conclude the cases as reason for the settlement. The lead plaintiffs maintained that their claims had merit, but that the possibility of a trial of considerable duration and its expenses proved too much of a risk to continue.

Paul Young, the founder and ceo of Securities Arbitration Group, said though he was not involved with the case, a company such as Tommy Hilfiger Corp. would typically have insurance in place to cover such a settlement.

Earlier this year, claims administration firm Gilardi & Co. LLC sent a letter to shareholders eligible to be included in the class action informing them of their options and filing deadlines. The letter estimated that the average recovery per share, before court-approved attorneys’ fees and expenses and the cost of administration, would be approximately 26 cents. It also warned that, even if the settlement were approved, it could still be subject to appeal.

Gilardi & Co. said class members have until Wednesday to submit proof of their claim. The company does not process claims until the filing deadline and could not say how many parties have filed.

Tommy Hilfiger was acquired and taken private by Apax Partners in 2006. Hilfiger remains with the firm as principal designer and chairman of its Strategy and Design Board.

In an unrelated development, Daniel Grieder was named ceo of Tommy Hilfiger Europe BV, a wholly owned subsidiary of Tommy Hilfiger Group.

At Tommy Hilfiger Europe, Grieder replaces Fred Gehring, who had been in that role since 1997, and who became the group’s global ceo following the 2006 acquisition. Grieder reports to Gehring.

A Swiss national, Grieder was most recently president and chief operating officer of Tommy Hilfiger Europe. He began working with the brand as a sales agent in 1997.

— With contributions from Samantha Conti

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