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Date: 10-10-2023

Case Style:

United States of America v. Neil Cole

Case Number: 1:19-cr-00869

Judge: Edgardo Ramos

Court: United States District Court for the Southern District of New York (Manhattan County)

Plaintiff's Attorney: United States Attorney’s Office in New York City

Defendant's Attorney:

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Description: New York City, New York criminal defense lawyer represented the Defendant charged with participating in a scheme to fraudulently inflate Iconix’s revenue and earnings per share, making false filings with the U.S. Securities and Exchange Commission (“SEC”), and misleading the conduct of audits.

In November 2022, a jury found COLE guilty following a four-week retrial before U.S. District Judge Edgardo Ramos.

Iconix, whose shares traded on the NASDAQ, was in the business of acquiring various brands, including clothing and fashion brands, and then licensing those brands to retailers, wholesalers, and suppliers who, in turn, produced and sold clothing and other products bearing the brand names.

Iconix utilized joint ventures (“JVs”) to profit from its brands in foreign markets. With respect to these JVs, Iconix transferred ownership of a trademark or brand to the JV while maintaining a 50% ownership interest in the JV itself. The other party involved in the JV purchased a 50% interest in the JV from Iconix. As part of the JV agreements, each JV partner was generally entitled to 50% of the JV’s licensing revenue. When it entered into a JV, Iconix recognized as revenue the buy-in purchase price paid by the JV partner, less Iconix’s cost basis in the trademarks.

Among the most critical financial metrics disclosed in Iconix’s public filings with the SEC were Iconix’s quarterly and annual revenue and non-GAAP diluted earnings per share (“EPS”). Iconix executives, including COLE, publicly identified revenue and EPS as the principal metrics demonstrating Iconix’s growth. They also touted Iconix’s consistent record of revenue and earnings growth and of meeting or exceeding Wall Street analyst consensus with respect to these metrics.

The Accounting Fraud Scheme

COLE engaged in a scheme to falsely inflate Iconix’s reported revenue and EPS by orchestrating a series of “round trip” transactions in which COLE and a senior Iconix executive induced a JV partner, a Hong Kong-based international apparel licensing company (“Company-1”), to pay artificially inflated buy-in purchase prices for JV interests, with the understanding that Iconix would then reimburse Company-1 for the overpayments. COLE executed the scheme for the purpose of enabling Iconix to report fraudulently inflated revenue and EPS figures based on the inflated buy-in purchase prices it obtained from Company-1.

COLE arranged for Iconix to enter into at least two JVs with Company-1 that included inflated buy-in purchase prices from Company-1: (i) an amendment to a preexisting Southeast Asia joint venture, which closed on or about June 30, 2014 (“SEA-2”), and (ii) a second amendment to the Southeast Asia joint venture, which closed on or about September 17, 2014 (“SEA-3”). SEA-2 and SEA-3 involved a fraudulent “round trip” transaction, lacking in economic substance, in which Company-1 paid an artificially inflated buy-in purchase price for its interest in the JV, in exchange for COLE’s agreement that Iconix would give back the inflated portion of the purchase price to Company-1. COLE and a senior Iconix executive hid from Iconix’s lawyers and outside auditors that COLE had reached an understanding with Company-1 to artificially increase the consideration Company-1 paid Iconix in exchange for COLE’s agreement to round-trip the overpayment back to Company-1.

Through the scheme, COLE caused Iconix to report fraudulently inflated revenue and EPS figures to the investing public. COLE did so, in part, to ensure that the reported figures met analyst consensus and to fraudulently convey the impression to the investing public that Iconix was growing quarter after quarter, as COLE had touted to the investing public.

* * *

Mr. Williams praised the outstanding work of the Federal Bureau of Investigation and the SEC Office of the Inspector General. Mr. Williams also thanked the SEC Division of Enforcement, which previously brought a separate civil action.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Jared Lenow, Justin V. Rodriguez, and Andrew Thomas are in charge of the prosecution.


Outcome: Defendant was sentenced to 18 months in prison. In addition to his prison term, COLE, 66, of New York, New York, was sentenced to three years of supervised release and ordered to pay forfeiture in the amount of $790,200.

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