Cole v. Iconix International Inc. — Entry #36

Case 1:25-cv-09357-MKV   Document 36-1   Filed 05/11/26   Page 1 of 3


                         EXHIBIT H


           Case: 23-7566, 02/28/2024, DktEntry: 23.1, Page 162 of 305
    Case 1:25-cv-09357-MKV Document 36-1 Filed 05/11/26 Page 2 of 3
                                                      A-157
UNITED STATES OF AMERICA, v.                                                                                           CORRECTED
NEIL COLE,                                                                                                            October 7, 2021
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 1        MR. REISNER: No objection.                                  1        In an e-mail or phone call, I asked him if there was
 2        THE COURT: It will be received.                             2 anything else he needed me to do, and there was not. And that
 3       (Government's Exhibit 1179 received in evidence)             3 is how I recall that day ending, and the Middle East joint
 4 BY MR. HARTMAN:                                                    4 venture happened.
 5 Q. Mr. Horowitz, what's the subject line of the e-mail?            5 Q. Earlier you told us that you thought that transaction was
 6 A. "Invoices."                                                     6 used to return some of the money that Iconix owed to GBG. Why
 7 Q. Can you read the body?                                          7 do you think that?
 8 A. "Hi, Seth. Sorry I was interrupted. It would be helpful         8 A. That transaction had a unique and, to my knowledge,
 9 if you could please confirm the invoice numbers for the 2.4        9 unjustified $3.1 million payment back to GBG for something that
10 million payment which we received. Thank you."                    10 was called market research and analysis. In this case, the
11 Q. Mr. Horowitz, did you have an understanding about why          11 return of funds to GBG was documented in the Middle East joint
12 Mr. Cole, Ethan Cole, was asking for this information?            12 venture transaction documents.
13 A. Yes.                                                           13 Q. Mr. Horowitz, you described a number of transactions, two
14 Q. What's your understanding?                                     14 transactions where Iconix agreed to return money in exchange
15 A. He was trying to line up our payment of 2.4 --                 15 for an increased purchase price. With respect to the two
16 approximately 2.4 million with the invoices that he had dropped   16 transactions you described, the SEA-2 and the SEA-3
17 off.                                                              17 transaction, do you know for certain, based on your
18 Q. Why did he need your help doing that?                          18 conversations with Mr. Cole, that that was the nature of the
19 A. Because he had dropped off invoices in excess of the $2.4      19 agreement?
20 million, and we were going to pick which ones to pay, and he      20 A. Yes.
21 needed to kind of match up which we paid and which ones we did    21         MR. REISNER: Objection, leading.
22 not.                                                              22         THE COURT: Overruled.
23 Q. Do you remember whether you responded to him?                  23 A. Yes.
24 A. I don't recall.                                                24 Q. Is the same true with respect to the Middle East
25 Q. You can take that down, Mr. Charalambous.                      25 transaction?

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 1        Mr. Horowitz, we talked about the Middle East joint         1         MR. REISNER: Same objection.
 2 venture earlier and the fact that it was slated to happen in       2         THE COURT: Overruled.
 3 the fourth quarter of 2014. I think you told us it did             3 A. I cannot be certain of that.
 4 ultimately happen; is that right?                                  4 Q. Mr. Horowitz, after the comment letter and the short report
 5 A. That is correct.                                                5 came out, did Mr. Cole give you any instructions for what to do
 6 Q. Can you describe for us what you recall about the closing       6 with materials that you had?
 7 history of that transaction?                                       7 A. Yes, he did.
 8 A. Sure. The transaction was supposed to close December 15th,      8 Q. Can you describe that conversation?
 9 that Monday. We received the short report and the SEC inquiry      9 A. Yes. It was an evening at the Iconix office, many people
10 on that day. I would say the office was turned upside down for    10 had gone home. I was at my desk. Neil came to my door, kind
11 about 48 hours.                                                   11 of stood outside my door, looking very frazzled and angry. And
12        My understanding, as of December 17th, was that            12 he said to me, quite simply, "I need you to get rid of any
13 although we had gone back and forth on doing the joint venture    13 e-mails with Jason and Jared and" -- I believe he said --
14 with GBG, that we were not going to be doing any more joint       14 "Yapp, and I'm going to do the same," and he stormed off to his
15 ventures, as the SEC inquiry was focused in large part on the     15 office.
16 joint ventures.                                                   16 Q. And who is Yapp?
17        On December 18th -- and I remember the dates well          17 A. Yapp is Kevin Yapp. He was an owner of New Rise, a
18 because it's my anniversary, and I was off, and I remember        18 licensee of ours for Rocawear and somebody that we were
19 where we were -- I got a phone call that -- I got a phone call    19 considering using for Rocawear Kids.
20 from Ethan Cole that the joint venture was back on. He started    20 Q. How did you react to Mr. Cole telling you this?
21 listing the details of it.                                        21 A. I was scared, nervous, shaking. I remember thinking, I
22        I got off the phone. I don't recall whether I called       22 don't know what he wants me to erase but I better do what he
23 Neil Cole or Neil called me, but he told me -- Neil told me       23 said. I was panicked.
24 that the deal was on. He had gone over to GBG himself to          24 Q. And what did you do?
25 negotiate any remaining terms.                                    25 A. I sorted e-mails by their size, looking for what would be


Min-U-Script®                                   Southern District Court Reporters                                 (41) Pages 350 - 353


           Case: 23-7566, 02/28/2024, DktEntry: 23.1, Page 163 of 305
    Case 1:25-cv-09357-MKV Document 36-1 Filed 05/11/26 Page 3 of 3
                                                      A-158
UNITED STATES OF AMERICA, v.                                                                                          CORRECTED
NEIL COLE,                                                                                                           October 7, 2021
LA7PCOL6            Horowitz - Direct                    Page 354 LA7PCOL6               Horowitz - Direct                   Page 356

 1 term sheets with Jason and Jared as recipients, and I deleted      1 company received from the SEC?
 2 them.                                                              2 A. No, it was not.
 3 Q. Did you do anything else to destroy documents?                  3 Q. What was the next one that you knew about, and when did it
 4 A. I did.                                                          4 come?
 5 Q. Did you have a further conversation with Mr. Cole about         5 A. I believe it came in February.
 6 this?                                                              6 Q. Of 2015?
 7 A. I did.                                                          7 A. Of 2015.
 8 Q. Can you describe that conversation?                             8 Q. Mr. Charalambous, can you please show for the witness and
 9 A. This was, I believe, sometime at the very beginning of          9 the parties what's been marked as Government Exhibit 112.
10 2015. I was in Neil's office, and he asked me if I had gotten     10        Mr. Horowitz, is this the letter that came from the
11 rid of any hard documents or any copies of anything with Jason    11 SEC in February of 2015?
12 and Jared, and I said I had not but that I would, and I did.      12 A. It is.
13 Q. Can you describe what you did?                                 13         MR. HARTMAN: The government offers Government
14 A. I took home a few of the binders that I had that were          14 Exhibit 112.
15 labeled GBG and Li & Fung. I took them home and threw them        15         MR. REISNER: No objection.
16 down a garbage chute.                                             16         THE COURT: It will be received.
17 Q. Why did you take them home?                                    17        (Government's Exhibit 112 received in evidence)
18 A. I was scared that somebody might find me doing it and felt     18 BY MR. HARTMAN:
19 that I could just take them home and throw them out.              19 Q. Mr. Horowitz, what's the date of this letter?
20 Q. When you say you were scared someone might find you doing      20 A. February 11th, 2015.
21 it, what do you mean by that?                                     21 Q. Can we go to page 2, please, Mr. Charalambous.
22 A. Somebody at the Iconix office would see me. I didn't want      22        Mr. Horowitz, could I ask you to read paragraph 2
23 to raise any suspicion. I was nervous in making a series of       23 here, please?
24 bad decisions.                                                    24 A. Starting at "Explain"?
25 Q. Did you keep anything?                                         25 Q. Actually, let's start with, "Please further explain," which

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 1 A. I did.                                                          1 is in the middle of that top paragraph.
 2 Q. What did you keep?                                              2 A. "Please further explain to us the primary business purpose
 3 A. I kept a binder that had the financial forecasts in them.       3 of the (1) initial formations of your international joint
 4 I just kept that in the office. I did not get rid of that, and     4 ventures between 2012 and 2014; (2) subsequent sales of your
 5 at a later date, I sent a series of e-mails from my work           5 wholly owned trademarks in certain international locations to
 6 account to my personal account to print out to make sure that I    6 existing joint ventures or licensees (December 2013, June and
 7 had hard copies of things.                                         7 September 2014); and (3) sale of your controlling interest in
 8 Q. Why did you keep those things?                                  8 OP Japan to your joint venture partner in December 2012."
 9 A. I kept those things because I knew that we had done             9 Q. Let's stop right there. Mr. Horowitz, did you have an
10 something wrong. I knew that we could be in trouble, and I        10 understanding at this point of what it was that the SEC was
11 knew from Neil's behavior then, and going forward, that he        11 concerned about with respect to these joint ventures?
12 would do anything to use others, in his words, as scapegoats or   12 A. Yes.
13 fall guys, and I wanted some record that this had occurred.       13 Q. What's your understanding of what they were concerned
14 Q. Mr. Horowitz, when you refer to having done things that        14 about?
15 were wrong, what are you referring to?                            15 A. Well, my understanding in how it was explained and
16 A. We inflated our revenues to hit quarterly numbers, and we      16 discussed internally at Iconix, was that these joint ventures
17 didn't tell our finance team about it. We didn't tell our         17 were counted as revenue for the company, and there are
18 legal team about it. We dragged out the payments so that way,     18 questions as to whether or not the structure, the actual
19 at the end of the third quarter, we had over $11 million of       19 structure or formation of these joint ventures, were properly
20 revenue that was owed back to a partner that was not properly     20 accounted for as revenue.
21 accounted for. And we would lie in our response to the SEC        21       And there was also a great focus on the puts and calls
22 because we left out material terms on why those prices            22 or the ability for the partner to force Iconix to buy back
23 increased.                                                        23 50 percent after five years, or Iconix's ability to buy back
24 Q. Let's talk about that. We saw the letter that came in          24 the 50 percent after five years.
25 December from the SEC. Was that the last letter that the          25 Q. To your understanding at this point, had the SEC identified


Min-U-Script®                                  Southern District Court Reporters                                 (42) Pages 354 - 357