DRC Congratulates Paul Weiss on Acquittal of Former Iconix CEO, Neil Cole, in Securities Fraud Trial
November 2, 2021
DRC congratulates Lorin Reisner, Rich Tarlowe, Andrew Reich, and the entire Paul Weiss trial team for their successful defense of former Iconix Brand Group (“Iconix”) CEO Neil Cole in United States v. Cole, 19-CR-869 (S.D.N.Y.). On Monday, a jury acquitted Mr. Cole of one count of conspiring to fraudulently inflate the financial performance of Iconix and one count of conspiracy to destroy records in a federal investigation. The jury was deadlocked on the eight remaining counts, and Judge Edgardo Ramos declared a mistrial as to those counts.
Neil Cole founded Iconix in 2005 based on a novel business model, which entailed acquiring the intellectual property of apparel brands and licensing those brands to clothing manufacturers and retailers worldwide. During his ten years as CEO, Mr. Cole grew the company into the second-largest licensing company in the world (behind only Disney), with more than $14 billion in annual sales.
The Government’s charges stemmed from three joint venture agreements Iconix entered into in 2013 and 2014 with its longtime business partner Li & Fung (“LF”), a Hong Kong-based brand management company. Under the joint ventures, Iconix sold LF the rights to license dozens of Iconix’s brands in Southeast Asia, China, and Europe in exchange for cash. The Government alleged that, in order to meet Wall Street’s quarterly and annual forecasts of Iconix’s financial performance, Mr. Cole orchestrated three “roundtrip” schemes in which LF agreed to pay an inflated purchase price while Iconix agreed to reimburse LF for the overpayment at a later date. Seth Horowitz, Iconix’s former Chief Operating Officer, pled guilty to several charges stemming from the two joint ventures that occurred in 2014 and testified against Mr. Cole, pursuant to a cooperation agreement with the Government. Two former employees of LF also testified on behalf of the Government pursuant to immunity orders.
The Defense argued that the Government had mistaken tough negotiations between long-term business partners as a fraudulent scheme. The Defense also argued that Mr. Cole acted in good faith and had no reason to believe anything was improper, especially given that in-house and outside counsel, accounting professionals, and other Iconix executives were heavily involved in negotiating the joint ventures. That theme was bolstered when Mr. Cole testified for more than a day as the trial’s final witness.
After three weeks of evidence and four days of deliberations, the jury cleared Mr. Cole of both the most significant conspiracy count as well as a charge of conspiring to destroy evidence and could not reach a verdict on the remaining substantive counts. DRC assisted the Paul Weiss trial team with jury research, demonstrative aids, jury selection, witness preparation, and at-trial technical support.
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