A former licensing mogul who is the brother of fashion designer Kenneth Cole has been arrested and charged with fraud in a scheme that may have involved a clothing line founded by rapper Jay-Z.
Manhattan US Attorney Geoffrey Berman on Thursday accused Neil Cole of cooking the books at Iconix, a licensing empire that owns labels like London Fog and Joe Boxer, as well as the Rocawear brand created by Jay-Z in 1999.
Cole, who will be presented in court later Thursday, has also been slapped with civil charges by the Securities and Exchange Commission following a five year probe.
The SEC suit accuses Cole, Iconix’s former chief executive officer, of falsely goosing revenue and earnings in the Big Apple-based company’s financial filings. The SEC and the feds allege that Cole, along with his former chief operating officer Seth Horowitz, did this by convincing firms to buy Iconix’s intellectual property assets for inflated prices with promises to pay them back later.
This helped artificially inflate the company’s revenues, the suit said. One firm overpaid for Iconix assets by $5 million in the second-quarter of 2014 and by $6 million the following quarter, the SEC said.
Shares of Iconix were halted on Thursday. The company, located near Bryant Park in Midtown Manhattan, said Thursday that it agreed to pay a civil penalty of $5.5 million to settle the SEC’s claims. It did not admit nor deny the allegations.
“Both Cole and Horowitz improved their compensation and realized substantial profits from trading in company stock as a result of their fraud,” the SEC suit alleges.
Horowitz, 43, pleaded guilty to accounting fraud and obstruction of justice on Dec. 2 and is cooperating with the feds.
After the SEC launched its investigation in December 2014, Cole, 62, “directed that Iconix respond with false and misleading statements” and even “deleted” emails to hide their misdeeds, the SEC alleged.
Cole, who founded Iconix in 1991, left the company in August 2015. Horowitz left in April 2015 after two years at the company.
“Neil Cole acted lawfully and properly in all respects, and this case should not have been brought,” his lawyers Lorin Reisner and Richard Tarlowe said in a statement. “All of the transactions at issue were fully reviewed and approved by Iconix’s legal, finance and accounting professionals, and Mr. Cole reasonably relied on those professionals.”
Last month, Jay-Z settled years of trademark-infringement litigation with Iconix over his clothing line, Roc Nation, which figured into the SEC’s investigation. Jay-Z was a witness in the case.
He and Iconix were embroiled in a trademark infringement lawsuit over his clothing line.