Kylie’s finances come under scrutiny

It seems the makeup mogul’s empire isn’t as big as she claimed – and she could even face jail time

SHE may be the baby of the fabulously wealthy first family of reality TV but she’s never been the kind of kid to rest on her laurels.

Her own spinoff show, an enormous Instagram empire, moving into her own home at 17, owning five properties by 21, becoming a mom when she was barely out of her teens, launching her own business – Kylie Jenner proved she could out-Kardashian the most ambitious of her attention-seeking siblings.

And when she was announced as the youngest self-made billionaire in history by US business magazine Forbes in 2019 her fans went ballistic. At just 21, Kylie dethroned Facebook founder Mark Zuckerberg, who was 23 when he made his first billion in 2003.

Her net worth was estimated at a staggering $1,2 billion (R21bn) after she sold 51% of her makeup company, Kylie Cosmetics, to beauty giant Coty, and Kylie the businesswoman was featured on the cover of serious business magazines as well as glossy celeb titles.

But oh dear – could it all have been based on a lie? A shock report by Forbes now claims Kylie (22) fabricated documents to inflate the size of her business. She’s also accused of “lying about company figures and forging tax returns”.

Forbes claims Kylie is $100 million (R1,75bn) shy of being a billionaire and pegs her net worth at $900m (R15,75bn).

In typical Kylie fashion she responded on social media – and clearly she didn’t see it coming. “What am I even waking up to?” she tweeted. “I thought this [Forbes] was a reputable site. All I see are a number of inaccurate statements and unproven assumptions. Lol.

“I’ve never asked for any title or tried to lie my way there ever. Period.”

But Kylie might not be lolling for very long. Those in the know say this isn’t something that can be brushed aside like a bad hair day. This is real-life stuff – and little Kylie could be in big trouble.

KYLIE Cosmetics was born out of its namesake’s obsession with a plump pout, which led her to turn to fillers to puff up her pencil-thin lips. She said she didn’t want to promote surgical enhancements so she created her own kits, consisting of lipliners and lipsticks.

Fans loved it. In November 2015 she launched her first batch of 15 000 kits at $29 (then R449,50) each and they sold out in less than a minute.

The business – punted on Kylie’s vast Instagram network – took off immediately. Revenue over the first 18 months totalled $400m (then R5,4bn) and Kylie had a take-home pay of $250m (then R3,3bn), according to her publicists.

The following year revenue increased to $330m (then R4,4bn) and in July 2018 Kylie was ranked 27th on Forbes’ list of the richest self-made women. The magazine estimated she’d soon become the youngest self-made billionaire – and it was right.

When Coty bought 51% of her company for $600m (R10,5bn) at the beginning of this year, the deal placed the value of the company at $1,2bn (R21bn).

“Kylie is a modern-day icon with an incredible sense of the beauty consumer,” Coty chairman Peter Harf said when he announced the acquisition.

But stock analysts were sceptical from the start. Did Coty overpay for a majority stake in a celeb brand that could just be a fad? Suspicions grew when new financial disclosures by the publicly listed company revealed that Kylie Cosmetics’ earnings were far lower than previously claimed.

Financial statements show Coty’s total revenue for 2018 was about $125m (then

R1,8bn) – far less than the $360m (then R5,2bn) claimed by Kylie Cosmetics.

Forbes also reports that Kylie’s representatives told the publication her skincare line, launched in May last year, made $100m (then R1,4bn) in revenue in its first month and a half – but Coty’s figures show the products were estimated to generate just $25m (then R350m) for the year.

A formal inquiry has been launched into Kylie’s financial affairs. She’s likely to face a criminal investigation since her financial filings with the Securities Exchange Commission (SEC) – a branch of the US federal government that protects investors – might have been exaggerated.

“My guess is the SEC will begin an informal inquiry and then elevate that to a formal investigation, which gives them subpoena power,” says Jan Handzlik, a lawyer who’s defended celebrities in financial fraud cases.

If a formal investigation concludes there was financial-statement fraud, the SEC could force Kylie to cough up.

“If the court rules the Jenner companies received ill-gotten gains, profited from financial-statement fraud or financial misdeed, these staggering sums [paid by Coty] could be returned.”

What’s more, if found guilty of financial fraud Kylie could face jail time as well as a hefty fine.

“We don’t know if there’s something here that doesn’t meet the eye,” Handzlik says. “But taking the allegations at face value, there’s a basis to conduct an investigation and move ahead with an enforcement action or a criminal prosecution.”

APART from her initial incredulous tweet Kylie hasn’t said much – although she seems at pains to play it down.

“This is literally the last thing I’m worried about right now,” she told fans on social media. “But okay, I’m blessed beyond my years.”

But Handzlik says she doesn’t seem to understand there’s a lot more riding on this than her billionaire status being revoked. “In the entertainment world exaggeration is a time-honoured tradition. But here a private company was sold for a lot of money to a large publicly traded company and that brings a lot more scrutiny.”

Forbes doesn’t mince its words. “Of course white lies, omissions and outright fabrications are to be expected from the family that perfected – then monetised – the concept of ‘famous for being famous’.

“But the extraordinary measures to which the Jenners have been willing to go, even creating tax returns that are likely forged, reveals just how desperate some of the ultra-rich are to look even richer.”

Financial analyst Stephanie Wissink echoes the sentiments. “It’s fair to say everything the Kardashian-Jenner family does is oversized,” she says. “To stay on brand, it needs to be bigger than it is.”