The Iconix Brand Group's founder and former chief executive, Neil Cole, 62, has been charged by U.S. federal prosecutors with being involved in an accounting fraud scheme. Cole is charged with ten counts of accounting fraud including securities fraud, making false filings with the U.S. Securities & Exchange Commission and conspiracy to destroy records. Meanwhile, Seth Horowitz, 43, the ex-chief operating officer of the company, pleaded guilty to a single count to related charges on Dec. 2, and agreed to cooperate with the authorities.
The accusations made against Cole and Horowitz came after the company's new management entered into an agreement with disgruntled shareholders who had filed a class action suit, prompting the SEC's investigation.
According to prosecutors, Cole and Horowitz inflated Iconix' revenues and earnings per share for the fourth quarter of 2013 and all of 2014 through a series of fraudulent transactions with joint venture partners in Asia. Cole's lawyers said in a statement that their client had done nothing wrong as all the transactions in question had been approved by Iconix' lawyers and accountants. Cole stepped down in August 2015 after leading Iconix for a decade. Horowitz had resigned from the company a few months earlier, in April 2015.
In its most recent income statement, Iconix reported a 23.2 percent drop in revenues to $35.5 million for the third quarter, but its adjusted Ebitda margin improved to 59 percent from 35 percent in the year-ago period, thanks to lower expenses. International revenues declined by 17 percent, primarily due to poor performance in China by one of Iconix' most important brands, Umbro, and by lower sales by Umbro and Lee Cooper in Europe. Other sports brands in Iconix' portfolio include Danskin and Starter.