Irvine sportswear maker Mossimo Inc. said it will pay $13 million to settle state and federal class-action lawsuits claiming it misled investors with falsely optimistic financial statements and progress reports. Company Chairman Mossimo Giannulli disputes the allegation that Mossimo deceived shareholders, but said the deal would remove uncertainty at a time when the clothier is trying to retrench. "It's been an absolute distraction," he said. "You never know what can happen in court. We wanted to move on." Giannulli said the company's insurance, bolstered by an additional policy he paid for himself, will cover the settlement.
The case was filed on behalf of those who bought Mossimo shares between its initial public offering Feb. 22, 1996, and Jan. 14, 1997. In that period, the stock ballooned from $18 a share to as high as $50, before plummeting to less than $6. The stock closed at $10.13 a share, down 19 cents, on the New York Stock Exchange. Plaintiffs' attorneys contended Mossimo executives failed to tell investors quickly enough about production snafus and a trouble-plagued effort to expand into women's wear. Last year, Mossimo lost $13.8 million as sales slumped 36%. It is unknown how many shareholders will qualify for the settlement, what their losses were or how much they can recover, plaintiffs' attorney Jan Adler said. Still, Adler said, "We believe it's an excellent settlement." To meet federal regulations, Giannulli's purchase of extra insurance will show up in the company's balance sheets as a noncash $6.1-million charge to earnings in the quarter that ended June 30.