Former Iconix CEO Neil Cole Charged With Accounting Fraud
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Neil Cole, the founder and former CEO of Iconix Brand Group Inc., has been arrested and charged by federal prosecutors with inflating the company’s revenue and earnings and obstruction of justice, according to an indictment made public today.
Cole, who had led the brand management firm for a decade before stepping down in August 2015 amid a challenging time for the firm, and Seth Horowitz, Iconix’s former COO, were named in separate charging documents in Manhattan federal court. (Horowitz had resigned from Iconix in April 2015; his departure had come just two weeks after CFO Jeff Lupinacci exited in March 24.)
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Cole is alleged to have “entered into illegal secret agreements with joint venture partners to artificially inflate the value of [Iconix],” as well as “lied to outside auditors and to the SEC, and took steps to destroy evidence,” stated U.S. attorney general Geoffrey Berman, adding that Cole is “facing serious criminal charges for his alleged conduct.”
Federal prosecutors have described the alleged actions of Cole and Horowitz as “an accounting fraud scheme.”
“To aggravate matters further, they allegedly destroyed and concealed evidence from the SEC during their inquiry into the company’s joint ventures,” said FBI assistant director William Sweeney. “This is not a crime to be taken lightly, and as our charges today prove, this type of alleged dishonorable behavior will not go unpunished.” (The SEC also filed suit against Horowitz and Cole today, Bloomberg reports.)
In a statement to FN today, Cole’s legal counsel, Lorin Reisner and Richard Tarlowe, referred to the charges as “completely baseless.”
“Neil Cole acted lawfully and properly in all respects, and this case should not have been brought,” Reisner and Tarlowe said. “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. Mr. Cole has had a distinguished career as a brand management innovator and pioneer, and he acted in the best interests of Iconix and its shareholders at all times. Good faith business conduct by a senior business executive should not be criminalized.”
Horowitz has pled guilty and is cooperating with the investigation, according to the attorney general’s office.
The Securities & Exchange Commission began investigating Iconix in 2015. Cole served as founder, chairman & CEO of the company until his resignation in August of that year.
At the time, the company said it planned to “fully cooperate with the SEC” and had been in a “letter comment” period with the commission.
Soon after, the firm re-reported several financial statements for 2013 to 2015. Iconix filed the amended statements at the end of November 2015.
Under Cole’s watch, the once high-flying brand management firm had owned Badgley Mischka, Candie’s and London Fog, and managed their licenses and brand extensions.
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