Neil Cole Sentenced to 18 Months for Inflating The Books at Iconix
● The former Iconix CEO, who once oversaw a branding empire and was convicted last year, plans to appeal the sentence and will remain free on bail.
Neil Cole, who transformed his family business into the branding powerhouse Iconix Brands Group only to be convicted last year of inflating the books, was sentenced to 18 months in prison in Manhattan federal court on Tuesday.
While Cole's attorneys had asked for probation, U.S. Attorney Damian Williams pushed for a prison sentence of six-and-a-half to just over eight years, pointing in court filings to “the calculated, long-running and sophisticated nature of Cole's fraudulent scheme” as well as “Cole's abuse of his position of trust as the powerful CEO of a publicly traded, multibillion-dollar company.”
“From 2014 to 2015, Cole engaged in a scheme to falsely inflate Iconix's reported revenue and EPS by inducing a Hong Kongbased JV partner, Global Brands Group
Asia Limited, to purchase JV interests at artificially inflated prices based on
Cole's promise to reimburse GBG for the overpayments,” Williams said.
But while Judge Edgardo Ramos said he believed Cole was untruthful during trial, he also described the two transactions, which briefly inflated Iconix's revenues by $11 million, as outliers in the company's history. He also took into account Cole's long-standing charitable endeavors.
Cole will remain free on bail pending appeal.
“First and foremost, the court has continued Mr. Cole's release on bail pending appeal,” said Cole's legal team in a statement after the ruling. “That decision and today's sentence comes after the government charged Neil Cole with participating in a fraud scheme with others, and he was forced to go to trial twice to defend those charges. The jury in the first trial acquitted Mr. Cole of all conspiracy counts. Although the second jury convicted, we are confident in the strength of Mr. Cole's appeal of that verdict and look forward to the opportunity to present our arguments to the Second Circuit.”
While the impact of the transactions in question are difficult to quantify, the government said the parties in the case estimated that they inflated Iconix's share price by 2 percent and therefore netted Cole nearly $1 million in extra profits as he sold roughly $40 million of the company's stock.
Seth Horowitz, former chief operating officer at Iconix, previously pled guilty for his involvement in the case and testified at Cole's trial.
“Neil would threaten me that my career was over and that I would no longer be able to work at a public company,” Horowitz said, according to the government's filing. “He said something to the effect that he knew about the transactions but that he could pass a lie detector test saying he didn't but he knew I could, too, essentially building a he-said-versus-he-said scenario.”
An initial trial in 2021 ended with Cole acquitted of two conspiracy counts and a hung jury on eight other counts, including making false filings with the Securities and Exchange Commission, improperly influencing the conduct of audits and securities fraud. He was then found guilty on the eight counts in a retrial last year.
Cole's attorneys said the two transactions in question changed his life, in their own court filing on his behalf.
“These two transactions — which occurred months apart and represent a tiny fraction of the many transactions Iconix has been a part of over Neil's long career — led to Neil's eventual departure from Iconix, and subjected Neil to internal investigations, a civil regulatory investigation, a criminal investigation and indictment, and two trials over the course of two years,” the filing said.
The filing details how Cole worked at the family shoe business under the exacting eye of his father, left the business, came back and ultimately transformed it into Iconix, which borrowed against the intellectual property of brands to go on a dealmaking spree, buying Badgley Mischka and Joe Boxer, inking a licensing with Madonna for her Material Girl brand, linking up with Jay-Z on Rocawear and more.
“By 2014, the business was worth $3 billion on Nasdaq and employed 150 people across multiple continents,” the filing noted. “The only company in the world doing more licensing was Disney.”
But the fall was hard. By the next year, the company was under investigation and Cole was out. In 2019, Cole spent nearly a month in a hotel so his daughter wouldn't have to see him arrested, according to the filing. And the day he was convicted, his wife said she was divorcing him.
“As he awaits the outcome of this sentencing, and the conclusion of his appeal, Neil has filled his days by helping his sons plan a new business venture, to replace the careers they lost as a result of his trial and conviction, and spending as much time with his family as he can, with the possibility looming that his time with them may soon be cut short,” his lawyers wrote.
A series of high-profile relatives and friends wrote letters to Ramos on Cole's behalf.
His brother, designer Kenneth Cole, pointed to Cole's work with the Candies Foundation to address teen pregnancy, other philanthropic endeavors and the ordeal he has already been through. “Sadly, Neil's career and personal life have been suspended the last seven-plus years during the course of these proceedings,” Kenneth Cole said. “He has lost the business he built and loved, and along with his kids (who also lost their jobs,) have been forced to live under a shadow making it almost impossible to find alternative employment.”
Cole's brother-in-law, former New York Gov. Andrew Cuomo, said: “I began working with Neil during my first administration and appointed him to the Sage Commission. Here we did our best to help streamline government, which was not an easy challenge. Over the next few years Neil was part of two missions to Israel, meeting with government and showing our support during the Hebrew University bombings and also during the Gaza War in the summer of 2014.”
And Sam Edelman, a long time friend and former colleague of Cole's, attested to his “character and contributions.”
“I started my career reporting directly to Neil Cole, when Neil was a vice president at his father's company called Candies,” Edelman said. “Neil was attending law school at the time, and I had taken over his responsibilities at the company. I had Friday meetings with Neil to bring him up to date on the business and everything we were working on. I have always found him to be smart, sensitive and I had enjoyed our working relations so much that we became close friends and have been very much a part of each other's lives for over four decades.…Neil has touched me and my family in the most meaningful ways. I truly love Neil. I believe in him, and I believe that he has great things to continue contributing to society.”