Landlord accuses Saks Fifth Avenue of fudging receipts to reduce rent. (Up Front).

Winona Ryder might appreciate this court case.

Saks Fifth Avenue, the tony Beverly Hills department store that recently accused the troubled actress of shoplifting $5,000 worth of designer duds, is being accused of cheating its landlord out of rent.

The retailer of Gucci evening wear and Louis Vuitton purses has been leasing a store on Wilshire Boulevard from shopping center developer Alexander Haagen III and his wife, Betty, since 1995.

The Haagens claim that the upper-crust merchant has swindled them out of at least $3 million in rent by under-reporting sales, destroying sales receipts, and shuffling placement of merchandise in order to keep its lease rate down.

The Haagens recently amended a lawsuit filed in late 2000 against Birmingham, Ala.-based Saks Inc. They want to go to court on the matter later this year.

"For years, the Haagens have been thwarted every time they tried to review Saks' accounting records, as they are entitled to do under their lease," said Alan Yudkowsky, the Haagens' attorney at Stroock & Stroock & Lavan, a law firm in Century City. "Saks has been destroying cash register tapes, hiding electronic data and making false representations in court."

Executives at Saks say they don't owe the Haagens anything.

"The lawsuit is without merit, and we are defending it vigorously," Brian J. Martin, executive vice president and general counsel of Saks Inc., said in a written statement.

Saks currently pays the Haagens a base rent of $2 million a year for the 100,648-square-foot building. But the 25-year lease calls for the company to fork over an additional 3 percent on any net sales exceeding $20 million a year.

And therein lies the problem. Saks claims that sales in the building have ranged between $18.2 million and $19.8 million each year since 1996. But the Haagens suspect those numbers were being artificially understated.

Saks Fifth Avenue occupies two buildings on Wilshire Boulevard. Saks Fifth Avenue East, at 9600 Wilshire Blvd., is owned by Saks and sells primarily women's clothing, jewelry, cosmetics and accessories.

Next door, at 9634 Wilshire Blvd., Saks Fifth Avenue West is owned by the Haagens. The building houses the men's departments, women's large-sized and petite clothing, and Sak's administrative offices. Before Saks moved in, the building was occupied by I. Magnin, the now-defunct upscale department--store chain.

Suspicious movement

The Haagens, who have been major developers of shopping centers in Southern California, became suspicious when sales at Saks West failed to exceed the $20 million trigger for higher rent payments.

In their lawsuit, they noted that when I. Magnin was in the building, net sales consistently exceeded $20 million. Consequently, when Saks Fifth Avenue's sales didn't come close to the $20-million mark, the Haagens got suspicious.

Meanwhile, sales at the Saks-owned East building have mushroomed.

"Ever since the Haagens entered into the lease with Saks, the Saks East store sales have increased exponentially," Yudkowsky said. "They began at $38 million in 1995 and were in excess of $70 million last year." Meanwhile, sales at the Haagen-owned building have dropped from $38 million (a year) when I. Magnin was there to under $20 million, with a minor exception in 1995, he said.

In 1998, the Haagens hired FTI/Kahn Consulting, an auditor, to look at cash-register receipts, records and books at the Saks Fifth Avenue West store. The auditor requested cash-register receipts going back three years, but the store maintained that it only kept 13 months worth of receipts, Yudkowsky said.

"The auditor was having enormous difficulty getting the documents he needed to do a proper audit," the attorney said.

In December 2000, the Haagens filed a lawsuit in U.S. District Court in Los Angeles. They amended it early this month, accusing Saks of fraud, concealment and breach of fiduciary obligations after discovery and mediation failed.

The Haagens maintain that Saks Fifth Avenue moved its administrative offices to the West building from the East building to cut down on the amount of space used for retail sales.

They also allege that employee discounts were overstated, that Saks excluded from its reports sales made by other retailers who sublet space in Saks West departments, and that sales of clothing to movie studios were understated.

The property owners also claim that more expensive items, such as jewelry, furs, designer handbags and cosmetics, were placed in the east building so that sales at the west building did not exceed $20 million.

A trial date was originally scheduled for Sept. 3, but has been pushed back to give Saks Inc. time to respond to the amended complaint, or request its dismissal.