Lakeland may owe former Brazil execs $10M

Ronkonkoma-based Lakeland Industries lost a key round in a legal battle with two former executives in Brazil, where an arbitration panel ruled the protective-clothing manufacturer has to pay the two $10 million.

The company, which announced the decision Tuesday, said its options include suing to have the award set aside. But in a statement, it acknowledged that overturning the ruling could be difficult and warned that paying the award could cause it to default on a bank loan.

Christopher Ryan, Lakeland's chief executive, said in an interview that the company would be able to pay the award and that the statement included the worst-case scenario to fulfill regulatory requirements.

"We could easily raise the money because we have a $70 million net worth, and all we need is $10 million," Ryan said.

The ruling stems from Lakeland's purchase of a factory in Bahia State from a brother and sister in 2008, Ryan said. The siblings later became Lakeland officers. The company agreed to pay the pair a supplemental purchase-price payment based on the cash flow of the acquired company. But Lakeland determined that based on results, its didn't have to pay. The company also said it was off the hook because it terminated the officers "for cause."

The former officers sued and sought not only the supplemental payments but remuneration for the remaining months on their management contract because they claimed they were terminated without cause. The arbitration panel ruled in their favor.

Lakeland's stock tumbled $2.07 a share, or 20.55 percent, to close at $8 a share in Nasdaq trading Tuesday.