Levi's Investigates Fraud Claim

Levi Strauss, the US clothing group, has hired an outside law firm to investigate allegations of tax and accounting irregularities made by two former employees.

The markets regulator, the securities and exchange commission, has also opened an informal inquiry into the claims.

The company's audit committee ordered the investigation after Robert Schmidt and Thomas Walsh filed a lawsuit in April accusing the firm of filing false financial statements since 1997. They claimed they were fired from the company for refusing to conceal the accounting irregularities.

The complaint alleged that a partnership set up in Brazil was an illegal tax shelter, which enabled Levi's to book hundreds of millions of dollars in deductions and income. They claim that two auditors at the accounting firm KPMG who questioned the tax scheme were removed at Levi's request.

Levi's has denied the allegations and countersued the two former employees, accusing them of a "conspiracy" to make "false misleading and defamatory statements" about the company.