A former sales executive at clothing marketer Carter's committed financial fraud by manipulating the amount of discounts granted to one of the company's largest customers, securities regulators alleged in a civil lawsuit on Monday.

The Securities and Exchange Commission accused Joseph Elles, a former executive vice president at Carter's, of concealing the discounts from the company's accountants, the lawsuit said.

R. Joseph Burby IV, an attorney for Elles, said Elles intended to vigorously defend himself in court, adding that his handling of customer discounts was well known to senior management at Carter's.

Why the SEC has decided to selectively pursue claims against Mr. Elles will be one of the issues to be determined in the litigation, Burby said.

Carter's entered into a non-prosecution agreement with the SEC and will not be charged with any violations of federal securities laws, regulators said in a statement.

That agreement reflects Carter's exemplary and extensive cooperation in the investigation, the SEC said.

Carter's did not immediately respond to a request for a comment.

Because of Elles's actions, Carter's income in certain quarters was overstated, the SEC lawsuit said.

The lawsuit said that Elles made about $4.7 million in profit from his stock sales during this time.

Securities regulators are seeking disgorgement of any ill gotten gains, civil penalties and to bar from Elles serving as an officer or director at a public company.

(Reporting by Dan Levine; Editing by Robert MacMillan)