Saks Settles Vendor Suits

On Tuesday, Saks noted in its earnings report that, during its fiscal third quarter, it incurred after-tax expenses of about $2.7 million, associated with the settlement of two unnamed vendor lawsuits. Those suits were brought separately by former Saks vendors IDC and Kleinert's Inc.

"The case is officially over. The money has been paid," said plaintiff attorney Donald L. Kreindler, referring the IDC lawsuit.

He declined to disclose the terms of the settlement, but said he is extremely pleased with them. IDC had turned down an earlier $1.8 million settlement offer from Saks.

"The amount of the settlement with IDC was not made public," said Julia Bentley, a spokesperson for Saks Inc. "However, a vast majority of the settlement had been reserved for. We are pleased with the outcome and glad to put this behind matter us."

In September, Saks settled an investigation by the Securities and Exchange Commission into alleged financial-reporting violations related to the matter, by agreeing to a permanent injunction against future violations.

Saks had admitted in 2005 that it took $21 million in improper deductions against vendors and fired three executives and a handful of managers involved with collecting the extra money.

Oscar de la Renta, a New York design house, for nine years licensed its "Oscar by Oscar de la Renta" trademark to Apparel Group International, in a royalty agreement requiring the apparel company to pay the designer 5 percent of net sales.

Saks was the licensee's biggest customer, accounting for about 60 percent of its total business, or about $90 million in wholesale purchases of Oscar-licensed clothing from 1996 to 2003.

The former licensee, now known as International Design Concepts, sued Saks in 2005 in Manhattan federal court, alleging fraud, among other things, and accusing Saks of improperly demanding more than $31 million in penalties for so-called markdown allowances for discounted merchandise. In addition, Saks subtracted tens of millions of dollars for "chargebacks" or alleged short shipments, late deliveries, mismarked merchandise and improper packaging, according to the suit.

So onerous were the allowances and chargebacks that the licensee couldn't afford to make $450,000 in royalty payments to Oscar de la Renta. The design house canceled the licensing deal in 2004, and the licensee went out of business.