Diversified apparel company Hampshire Group has sacked CEO Ludwig Kuttner in connection with an audit committee probe.

The investigation found that Kuttner had submitted expenses reports for about US$1.45m over about ten years and that a substantial amount of these were "fraudulent or not substantiated in accordance with company policy".

Hampshire has also lain off executive VP and treasurer Charles Clayton.

Michael Culang will continue to serve as the interim CEO and Jonathan Norwood will continue to serve as the interim Treasurer.

Chairman of the board Michael Jackson said: "The board and management will not tolerate the type of wrongful conduct brought to the attention of the audit committee as part of this investigation or any other type of improper conduct.

"We expect our officers and employees to conduct the business of the company at the highest level of business ethics."