Iconix Founder Neil Cole Convicted of Inflating Books
Neil Cole, founder and former chief executive officer of Iconix Brand Group, was convicted on Monday of inflating the company’s earnings and revenues, six counts of making false filings to the Securities and Exchange Commission and misleading the conduct of audits.
The decision capped a four-week retrial in Manhattan federal court of a case that was first brought in 2019.
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Sentencing has not been scheduled, but the New York U.S. Attorney’s office noted that Cole, 65, faces a maximum of 20 years in prison for each of the eight counts against him. Any actual sentence will be determined by the judge.
U.S. Attorney Damian Williams said: “As a unanimous jury has now found, Neil Cole deceived his company’s investors and auditors in order to make his company appear to be performing better than it was. Cole tried to hide his conduct behind tricks and lies, but the truth is now clear: Cole cooked the books. This verdict sends a message that this office is committed to holding corporate executives accountable when they resort to fraud, no matter how long it takes. Wall Street should know that we will not be deterred from seeking justice in tough cases.”
An earlier trial held in fall 2021 ended with a partial acquittal and a deadlocked jury that ultimately led to this trial and the conviction.
Sean Hecker and David Oscar Markus, counsel to Cole, said: “The first jury acquitted Neil of two conspiracy counts, so we are of course disappointed in this verdict on the other counts. We will continue to fight and believe there are significant issues for the appeal.”
The conviction is a blow to Cole, who pioneered the brand management business model by refocusing the Candie’s business and giving it a broader mission of managing the intellectual property of a host of brands, including names as diverse as Umbro, Pony and Peanuts.
For a time, the business seemed to be a fresh take on how to find more value in older brands, but prosecutors argued, eventually successfully, that Iconix wasn’t getting quite as much traction as it seemed.
Iconix set up a series of joint ventures to help manage its various brands tied to its brands around the world.
But the U.S. Attorney’s office said in a statement that, “Cole engaged in a scheme to falsely inflate Iconix’s reported revenue and [earnings per share] by orchestrating a series of ‘round trip’ transactions in which Cole and a senior Iconix executive induced a JV partner, a Hong Kong-based international apparel licensing company, to pay artificially inflated buy-in purchase prices for JV interests, with the understanding that Iconix would then reimburse [the partner, referred to as] Company-1 for the overpayments.
“Cole executed the scheme for the purpose of enabling Iconix to report fraudulently inflated revenue and EPS figures based on the inflated buy-in purchase prices it obtained from Company-1,” the U.S. Attorney’s office said.
