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Armory Bribery Scandal: Fashion World Questions the Hubbub

Major scandal or tempest in a teapot?

The 69th Regiment Armory on Lexington Avenue in Manhattan.

NEW YORK — Major scandal or tempest in a teapot?

This story first appeared in the February 8, 2008 issue of WWD.  Subscribe Today.

Fashion industry executives reacted with surprise Thursday to the news Marc Jacobs International and public relations firm KCD are caught up in a bribery scandal involving the 69th Regiment Armory — although many alleged such payments are the cost of doing business in the city.

Many executives also wondered why Attorney General Andrew Cuomo waited until the middle of the media frenzy of New York Fashion Week to unveil a scandal involving one of America’s top designers, given the state’s investigation into the armory began a year ago. But Cuomo’s office dismissed charges of political opportunism, and said the arraignment occurred this week due to the normal processing associated with a criminal case of this nature.

On Wednesday, as reported, James Jackson, the former superintendant of the 69th Regiment Armory here, was indicted on charges of demanding more than $30,000 to allow the space to be used by Marc Jacobs and others. A spokeswoman for the attorney general’s office said Thursday that seven other sites will be under investigation, but declined to elaborate. Inspector General Kristine Hamann said during Wednesday’s press conference that audits of the other seven armories in the New York metropolitan area will be initiated.

The attorney general’s spokeswoman also declined comment Thursday on whether the probe will be expanded to other fashion and p.r. firms that used the 69th Regiment Armory, or other publicly owned venues.

Over the last few years, the 69th Regiment Armory on Lexington Avenue has hosted a number of events, including two CFDA/Vogue 7th on Sale galas (2007 and 1990), the Victoria’s Secret fashion extravaganza in 2005, the Vogue VH1 Fashion awards in 1999, and Cartier’s 100th anniversary party for its Santos watch in 2004.

Steven Kolb, executive director of the CFDA, used the 69th Regiment Armory for 7th on Sale last fall. “We were lucky to be squeezed in there. Our agreement with the Armory was after [Jackson] had left already,” said Kolb. “We negotiated through the proper channels; we signed our agreement after he was no longer the superintendant.”

The prior 7th on Sale was held at Skylight Studios, but the first one was held at the 69th Regiment Armory in 1990.

Stan Herman, former president of the CFDA, said, “Since the tents legitimized fashion week, I don’t think anybody would dare do that kind of thing,” except for someone working alone. “There are too many options for us now.”

Jacobs is not the only fashion designer to favor using the armories for his fashion shows. Proenza Schouler showed its collections for the last two seasons at the Park Avenue Armory, which is no longer owned by the state, according to the public affairs office of the New York State Division of Department of Military and Naval Affairs. It is run by a nonprofit organization that leases space to the National Guard.

Pierre Rougier, president of PR Consulting, which represents Proenza Schouler, said, “In my experience, I have never been presented with a situation like this.”

Meanwhile, show producers and event planners were stunned to hear Thursday that Marc Jacobs International and KCD were involved in the bribery scandal, but were bemused by the size of the bribe.

“Thirty thousand dollars in the grand scheme of things is still small compared to what it costs to stage a fashion show,” said Paul Wilmot, owner of Paul Wilmot Communications. “Thirty thousand dollars is what you pay one model for a show.”

Wilmot said the superintendant didn’t appear to be overly greedy.

“All he was trying to do was wet his beak,” Wilmot said. “He got a [Bowflex] exercise machine, not even a car. I’m happy the attorney general has unearthed this guy, but it’s pretty small potatoes.

“It might be a tempest in a teapot,” he added.

Still, Wilmot branded Jackson “a crook,” and said his life will now be in shambles. But he said, it also serves as a warning. “It’s too bad. He got caught in it, and it sends a signal to everybody else out there. He’ll have major IRS problems,” said Wilmot.

Observers also pointed to the timing of the attorney general’s press conference. “[Andrew] Cuomo is a politician. It gives him a lot of attention,” said one fashion source. “My gut feeling is it’s not going to be a fashion witch hunt.”

Jeffry Aronsson, former chief executive of Marc Jacobs, who worked at the company in 2002 and now runs The Aronsson Group LLC, an investment firm, arrived in New York Thursday night from Japan and had read the news online. “It didn’t reflect the way I knew people to do business there, and the high integrity of the team I worked with. I was completely surprised to hear about it.”

One public relations executive said paying these kind of fees is part of the process of “driving the fashion machine,” and is especially prevalent in Europe. “You pay off certain people to get things done, and it’s a lot more than just selling dresses. A lot goes on under the table.”

Another p.r. executive said he was aware that KCD made payments to the Armory, and surmised it fell under the “do what you need to do to get it done” category.

“It certainly is not uncommon,” agreed another p.r. executive. “There’s always a certain amount of money spent keeping the people around you happy.”

One p.r. said he has tried over the years to rent the 69th Regiment Armory without any luck. “If they tell me it’s not available, I leave it alone, and don’t push further. It would never occur to me to bribe someone. Mr. Jackson takes a long time to get back to people, and he always says they’re booked.”

According to officials, since 2000, Jackson has solicited more than $30,000 in bribes from KCD, the company which produces Jacobs’ fashion show. The Armory rents for about $6,000 a day, and Jackson is accused of demanding money and gifts to hold certain dates and allow early access into the Armory to set up.

Under bribery statutes and laws, there are penalties attached to knowingly paying a bribe, as well as to taking them. There are also laws pertaining to commercial bribery, beyond just public employees.

Most private venues, such as art galleries and studios, charge a location fee, and whatever extra fees are involved are just folded into that fee, said executives. Event planners say one of the headaches they have to deal with is getting permits from the city to close off traffic and sidewalks. “There’s a process to it, but it’s not a payoff deal. You have to pay the city like an inconvenience tax,” said a p.r. executive.

Showgoers said Thursday they were not surprised by the news, having heard rumblings of such payoffs over the years. A few also noted the problem allegedly exists in some of Manhattan’s larger venues, especially union-run ones.

As for the Bryant Park fashion week tents, a spokesman for the Bryant Park Corp. said any investigation of them would be unlikely. “We’re a private non-profit, and the budget is pretty transparent. It’s unlikely with all the checks and balances.”

Publicist Deborah Hughes said, “It’s kind of like getting an apartment in New York. You grease the hand of the doorman and the superintendent and your name goes to the top of the list. I’m sure it goes on. It’s New York.”

One designer speculated that building management understands the lengths designers will go to in order to secure a space exclusively. Another questioned if lesser-known designers might be willing to pay something extra to gain the cachet of showing in a specific location that they previously did not have access to.

One showgoer suggested a designer who was shut out of using the Armory blew the whistle on Jackson.

Neither Marc Jacobs International nor KCD was accused in the indictment. However, a spokesman for the attorney general’s office told WWD on Wednesday, “Marc Jacobs International is the subject of an ongoing criminal investigation by the attorney general and we cannot comment further.” Both KCD and Jacobs’ firm are cooperating with the attorney general’s office. Both declined further comment Thursday.

According to the indictment, Jackson accepted the first alleged bribery payment related to Jacobs’ fashion shows in February 2000. In all, the indictment traces a pattern of 12 payments made by Marc Jacobs fashion shows to Jackson, all made either in September or February between 2000 and 2007. The last alleged payoff was made in September 2007, according to the indictment.

Jackson was arrested in October 2007 and arraigned this week. He pleaded not guilty.

Twenty-four of the 30 counts listed in the indictment against Jackson were filed in relation to the Jacobs shows and all were for receiving reward for official misconduct in the second degree or bribe receiving in the third degree.

 

The indictment said the other companies involved in the investigation, International Carpet Show and Ramsay Art Fairs, had alleged dealings with Jackson only in 2007.