St. John Sues Ex-Manager of Home-Store Unit

In a legal battle that is getting increasingly nasty, upscale women’s clothier St. John Knits Inc. filed a countersuit against Amen Wardy Jr., claiming that he diverted assets and that one female employee accused him of sexually harassing her during his tenure as chief executive of the company’s money-losing home-store subsidiary.

The Irvine firm’s cross-complaint, filed this week in Orange County Superior Court, charges that Wardy “misappropriated and/or diverted” corporate assets of Amen Wardy Home Stores LLC to further his own personal interest in Amen Wardy Inc., a separate Aspen, Colo., store owned by Wardy and his father, Amen Wardy Sr.

The lawsuit alleges that Wardy Jr. had the home stores buy inventory on behalf of Amen Wardy Inc., effectively fronting cash for Amen Wardy Inc.’s inventory purchases. As a result, the lawsuit contends, Amen Wardy Inc. essentially received multiple interest-free loans until the money was repaid.

Wardy Jr. tried to hide the alleged scheme from St. John by repaying Amen Wardy Inc.’s debts just before each financial quarter ended, according to the suit.

The Wardys had Amen Wardy Home buy “defunct and virtually unmarketable” inventory from Amen Wardy Inc., thereby allowing the Aspen store to sell inventory that it wasn’t otherwise able to sell, the suit alleges.

“This doesn’t make any sense at all,” said the Wardys’ attorney, Ronald Rus of Irvine. “This kind of flies in the face of St. John’s boasting of quality control.”

The lawsuit also charges that a former Amen Wardy Home store employee demanded $300,000 from the chain, claiming that she was sexually harassed by Wardy Jr. Among other things, the woman accused him of subjecting her to tape recordings of lewd conversations between himself and other women, and forced her to view various obscenities on the Internet on his office computer, the suit alleges.

Rus also denied those allegations, saying the woman, whose name was not disclosed in the suit, has made no such claims against Wardy Jr.

“There is absolutely no foundation for it,” he said. “They’re trying to do whatever they can to create some smear.”

Wardy sued St. John executives, including founders Robert and Marie Gray and their daughter, Kelly Gray, who is president of the company, last month after he was fired as chief executive of Amen Wardy Home Stores.

He claimed that St. John used the home stores as a “sacrificial lamb” to make its financial statements look better. The company owned by Wardy Jr. and his father filed a second lawsuit this week making similar allegations against St. John on behalf of AWH Direct LLC, a Colorado company owned by the Wardys and Bob Hightower, a Colorado resident.

AWH Direct owns 49% of Amen Wardy Home; St. John owns the remaining 51%.

Wardy said he was unfairly blamed when the home stores failed to make money. He contends he was actually cut out of the decision-making process.