With Design Dropped From Shareholder Suit

With Design In Mind International Inc., a Chatsworth maker of toys and novelty gift items, has been dismissed from a shareholder lawsuit stemming from the alleged embezzlement of company funds by two former With Design executives.

The complaint, filed in U. S. District Court in Los Angeles in August, 1992, accused With Design of making misrepresentations and omitting information in a 1991 prospectus for a stock offering.

It said that With Design did so in order to paint a rosy picture of the company’s financial condition and to obscure the alleged embezzlement.

But Judge William D. Keller dismissed With Design from the suit with prejudice, meaning that the plaintiff cannot refile the suit against the company.

In making his ruling, Keller held that the company could not be held responsible for the fraudulent activity of individual officials.

With Design’s former chief executive, Steve Zuloff, and former chief financial officer, Barry Benjamin, were also dismissed from the complaint, but the judge left open the possibility that the lawsuit could be amended and refiled against them.

Zuloff and Benjamin were ousted from the company a year ago, and subsequently the company’s new management alleged that the pair had embezzled $2.1 million.

They later settled a complaint brought by the company for about $1 million in stock and cash, but did not admit to any wrongdoing.

A second shareholder lawsuit is still pending. Glenda Sanders, an attorney representing With Design, said the company’s response to that action is due July 30.

She plans to file a motion for dismissal on same grounds as the first complaint.