Jay-Z claims SEC probe has become a ‘celebrity hunt’
By Lisa Fickenscher and Josh Kosman May 7, 2018 | 1:14pm | Updated
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What could Jay Z possibly know about securities fraud?
A lot, according to the Securities and Exchange Commission.
The hip-hop mogul is a key witness in the SEC’s investigation into the New York licensing firm that in 2007 bought his 8-year-old Rocawear company for $204 million.
A Manhattan federal court judge on Tuesday is expected to rule on just how much time Jay Z will have to give SEC investigators looking into the licensing firm, Iconix.
The SEC wants to question Jay Z and take a look at his e-mails and phone calls concerning “the value of the Rocawear trademark and his involvement with that brand after the sale to Iconix.”
Jay Z had previously ignored two SEC subpoenas — obligating the regulators to ask a judge to force the hip-hop star to sit for questioning.
Lawyers for Jay Z said in court papers filed Monday that their client was no longer involved with Iconix, didn’t know about the company — and that the SEC were merely on a “celebrity hunt.”
In fact, Jay Z was very much involved with Rocawear when it allegedly ran into financial issues in 2012 — and Iconix, then led by Chief Executive Neil Cole, started to lend Jay Z’s company much-needed cash, according to a lawsuit filed last year by an Atlanta pension fund.
The pension fund, which represents firefighters and cops and is an investor in Iconix, claimed that Cole knew Rocawear faced financial issues but made contrary statements — misleading investors.
In 2012, according to the suit, Cole publicly stated that he didn’t foresee Rocawear as being written off — saying it had “great revenue flows.”
Iconix owned the Rocawear brand and licensed it to a company headed by the hip-hop star through Dec. 31, 2014.
Jay Z also appeared in Rocawear marketing materials for years after the 2007 sale, Iconix regulatory filings show.
At issue is whether Jay Z was privy to the alleged scheme, spelled out in the pension fund lawsuit, that accused Iconix — owner of such brands as Candies, Mudd and London Fog — of propping up Rocawear by allowing it to put off making payments to Cole’s firm, sometime “for years.”
It wasn’t until 2016, well past the time that Rocawear exhibited extreme financial distress, according to court papers and sources familiar with the situation, that Iconix wrote down the value of the brand by $169 million.
In March, Iconix wrote down the final $34 million in Rocawear value. The alleged delay in writing down Rocawear’s value is a key focus of the SEC probe, sources said.
The SEC is zeroing in on Cole’s actions, according to three people familiar with the situation. The CEO left Iconix just months before the company revealed the SEC probe in December 2015.
Cole cultivated the relationship with Jay-Z, whose birth name is Shawn Carter, and was the primary liaison between the singer and Iconix.
“Neil basically created a venture to fund whatever Jay Z wanted to fund,” said one source with knowledge of the relationship. “But when things went south, Neil wasn’t funding the companies anymore and Jay Z lost interest in the partnership.”
Cole did not return calls for comment. Iconix also did not respond for comment.
FILED UNDER ICONIX BRAND GROUP , JAY-Z , SECURITIES AND EXCHANGE COMMISSION |
