NEW YORK — Linda J. Wachner, the former chief executive of The Warnaco Group, and two other company officials have agreed to pay $12.85 million to settle a three-year-old lawsuit accusing them of defrauding investors.

This story first appeared in the November 17, 2003 issue of WWD. Subscribe Today.

The agreement follows a long court battle in which a federal appeals court in Manhattan reversed a trial court’s original dismissal of the lawsuit in July 2002.

The lower court had dismissed the action on grounds that the shareholders had waited too long to sue because they were alerted to possible inventory and accounting issues much earlier than the firm’s official regulatory filings. One filing in question had been the 1998 revised annual report that Warnaco filed in April 1999.

This settlement follows a separate ongoing investigation by the Securities and Exchange Commission into Warnaco’s financial statements for fiscal years 1998, 1999 and 2000, according to a company filing with the SEC on Oct. 30. Warnaco had said the SEC might bring a civil action against the company and “certain persons” and that it was negotiating a settlement.

Wachner was once the one of the highest paid female ceo’s in the U.S., having earned more than $158 million in salary, bonuses and options from 1993 to 1999. Judge Lawrence M. McKenna of Federal District Court of Manhattan gave preliminary approval to the settlement last week.

In addition to Wachner, the two other defendants are William Finkelstein, Warnaco’s former senior vice president and chief financial officer, and Stanley Silverstein, former general counsel. Finkelstein currently is chief operating officer of American Enterprises Inc., a maker of children’s sleepwear, and Silverstein remains with Warnaco as a senior vice president.

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