By  on August 12, 2013

NEW YORK — Looking to avoid a contentious courtroom battle, Naeem Khan and his former creative director Lionel Geneste agreed Monday to settle a breach of contract dispute in Manhattan Supreme Court.

Geneste, the designer’s right-hand man from 2003 through the middle of 2006, will receive $125,000 — 75 percent of which will be paid Aug. 19. Both Geneste, who was scheduled to testify Monday morning, and Khan, who planned to take the stand for a third time, said they were relieved to put the case behind them, though each felt that way for different reasons.

Khan, who had described Friday’s opening-day testimony as “slander” and vowed to see the case through, had an entirely different point of view Monday. “The thing is, I have my collection to show Sept. 10. I want this to be over with,” he said, referring to next month’s show at Lincoln Center. His attorney, Edward Hayes, and Geneste’s lawyer, Bernard Daskal, negotiated a deal.

On Monday afternoon, Khan said that he always had a number in his head that he would agree to settle for. As to why he flipped that switch, he said, “It became clear to me that this person would stop at nothing in terms of false allegations in order to damage my brand and hurt my family. I wanted to move on in order to focus on my business and collection.”

Khan’s legal fees for Hayes wound up being more than the payout to Geneste, but the designer said preparing for the case “only meant working longer hours and several weekends in order to put in the necessary time on my collection. The collection will by no means suffer.”

Hayes noted that every second that Khan is away from catering to his customers and creating his collection costs him money.

Contradicting a statement he made earlier Monday when Khan said Geneste initially requested $1.8 million, the designer said later in the day that Geneste initially sought $800,000. But Geneste said Monday afternoon that he was always seeking about $300,000. Describing the announcement of his departure in March 2006 as “very amicable,” Geneste said he had agreed to stay through the end of June 2006. At that time he was entitled to a commission of 5 percent of sales, which was typically paid eight months to a year after retailers ordered from the collection, Geneste said after the case was settled.

Earlier in the day, Khan showed WWD what he said was the second of two letters sent in 2004 by the Internal Revenue Service inquiring about Geneste’s social security number. “I fired Lionel due to identity fraud — he had used his boyfriend’s social security number on the tax forms he provided to my company when he was hired. In addition, he had developed a pattern of long, unexcused absences,” Khan told WWD. “I wish I would have fired Lionel 18 months earlier than I did, when I was first notified by the IRS of his fraudulent activities. I mistakenly trusted him and gave him the opportunity to sort out the situation, which he never did.”

As for whether Khan plans to try to defuse the negative publicity from the trial or reach out to the White House since Michelle Obama has worn his designs, he said, “I am just focusing on designing my collection and on other initiatives we have planned for the brand this fall. I’m certain that the First Lady has many more important concerns than a former disgruntled employee of mine, but if she was concerned and wanted an explanation, I would of course be more than willing to explain the situation to her office.”

Geneste said he did not have a visa until 2007, so he could not have had a social security number at the time in question. He told WWD it was the responsibility of Khan’s company to withhold 28 percent of his wages.

Like Khan, Geneste sounded relieved to be done with the legal fight. The former creative director said he was certainly happy that he “did not have to take the stand because there were a lot of other things that were going to come out that were not pretty.”

In the next few weeks, Geneste plans to unveil an e-commerce site, bsophisticated.com, which will guide men in buying gifts for women. “It’s not about the price point per se. It’s about how special a gift is,” Geneste said.

There had been plenty of mudslinging Friday when the trial started. Audrey Gruss gave Geneste all the credit for elevating the label, and Khan’s former executive assistant Jessica Hoy seconded that. Hoy also claimed to have seen Khan and his wife Ranjana snorting cocaine at a 2006 party for Ken Downing of Neiman Marcus in the designer’s SoHo loft. As the proceedings wrapped up Monday, Hayes told Manhattan Supreme Court Justice Barbara Kapnick that Ranjana Khan had not been present at the April 11, 2006 party that Hoy referred to in her testimony.

As was the case on Friday, Khan was joined in court by his wife and their two sons, Zaheen and Sharia.

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