Byline: Arthur Friedman

NEW YORK — “Who’s entitled to it more than me?”
That rhetorical question was Arthur S. Levine’s response when he was asked why he wants to buy the Sassco unit of The Leslie Fay Cos. back from the company to which he sold it 15 years ago.
“In one form or another, I’ve worked for the company since 1957,” said Levine, chairman of the Sassco unit, who was interviewed with Sassco president Gregg Marks at the company’s headquarters at 1400 Broadway here.
Levine acknowledged that his plan to buy the company hinges on the approval of Leslie Fay’s creditors and the bankruptcy court, since the company is operating in Chapter 11.
The 47-year-old apparel giant has been in bankruptcy since the stunning announcement in February 1993 that an accounting fraud had misstated earnings — to the tune of $119 million over a three-year period from 1990 to 1992, according to the U.S. Attorney’s office, which is investigating the scandal.
In trying to buy the company, Levine has put himself at odds with John J. Pomerantz, chairman and chief executive officer of Leslie Fay, whom he considers “a good friend and an innocent man.”
Levine said when he heard the news of the accounting fraud, “I was in a state of shock.
“So was John Pomerantz in a state of shock,” he continued. “I think he’s put himself above the scandal and handled himself incredibly well under the circumstances. If that was me, I think I would have shot myself.”
“Over the years, John Pomerantz has been an asset to Sassco,” added Marks. “He has great rapport with the stores, both buyers and management, We have a good relationship with him. He’s doing what a chairman has to do.”
Levine would not comment on the motive behind the accounting fraud. He said “maybe I talked once” to former controller Donald F. Kenia, who has pleaded guilty to filing false financial statements with the Securities & Exchange Commission, while he was still with the company.
As for Leslie Fay’s former chief financial officer, Paul Polishan, whom Kenia has implicated in the scandal but who has yet to be charged, Levine said, “I didn’t speak to him when we were in the same company, and I certainly haven’t spoken to him since.”
By selling the Sassco division to Levine and a group of investors he claims to have in place, Leslie Fay would be slicing its earnings by more than half and its profitability by even more, according to industry sources. Last year, Leslie Fay had a volume of $660 million and the Sassco division had sales of about $335 million.
But Levine’s take is that “Leslie Fay will have a chance to succeed, and hopefully pull itself out of Chapter 11 in the next year.”
“Our pulling out would in no way hurt Leslie Fay,” Levine said. “It certainly will help them by infusing cash into the company. It’s not feasible for them to retain the company and satisfy the creditors at the same time. We’re proceeding along the normal negotiating process and I’m optimistic it will come to pass in the near future.”
Levine declined to put a price tag or a timetable on the purchase.
A Leslie Fay spokesman said “the board will review all serious offers and at the appropriate time make a decision” on whether to sell the division.
“The company hasn’t ruled anything in or out,” the spokesman said. “It’s up to the board to determine what is in the best interests of shareholders, creditors and the future of the company.”
The second thing Leslie Fay needs to do is to revamp its merchandising and marketing, Levine said, because the product hasn’t been good and the line hasn’t been performing.
The Leslie Fay spokesman acknowledged that there were “serious delivery problems” on fall merchandise due to a six-week strike this year by the ILGWU, but said the company feels the spring line is being well received by retailers.
Sources familiar with the situation feel the sale will go through because the creditors feel it’s their only chance to recoup their losses. They also think Levine might walk away if Leslie Fay fights him on the deal, and would probably take the bulk of the business with him. Levine pointed out that he has opted to work without a contract, so he has the flexibility to leave the company free of any obligations.
Sources also concur that Levine does have the investors in place to pull the deal off.
“Leslie Fay also needs the cash because of the actions being taken against them,” said Andrew Jassin, a partner in the consulting firm Marketing Management Group, referring to pending class-action suits taken by stockholders, creditors claims.
“Even though in the short term Leslie Fay would wind up with some cash or at least relieve itself of debt, it will also tear the belly out of the company,” Jassin said. “It will become a leaner, smaller company that has to learn the dress business all over again, because right now its dress business is nowhere.”
Jassin said Levine has done a “great job developing the Kasper brand,” while Leslie Fay has failed to develop brands such as Theo Miles and Personal Sportswear, and has left the Leslie Fay Brand slip considerably in sales and image.
One industry source estimated Kasper to be worth “upward of $200 million,” based on the division’s volume and double-digit operating income ratings.
Saul Berkowitz, senior audit partner in Goldstein Golub Kessler & Co., an accounting firm here, said there are two ways to look at Levine’s proposal to buy Sassco.
“The most likely scenario is that it would be the beginning of the end of Leslie Fay,” Berkowitz said. “Any time a key player or a key division pulls out, you always have to ask what’s left. However, if the board feels it can obtain reasonable value for Sassco and include it in its reorganization plan, it could be a good way to solve a very problematic situation.”
Asked if he had any regrets, given the circumstances, Levine said,”I’m only sorry that I never had the opportunity to see how other companies operate.”
Levine traces Sassco’s roots to Bobbie Brooks, where he became president of the firm’s Kelly Arden dress and suit line in 1963. In 1972, he bought the division, and in 1975, licensed the Sasson label for suits and dresses. That line went sour, however, when Sasson started selling to the mass market, he added.
“Leslie Fay was about ready to close the Kasper for JL Sport division, which was designed by [Herbert] Kasper,” Levine reflected. “We struck a deal with Kasper in 1984 to use his name on a line of suits, which we called Kasper for ASL.” ASL are Levine’s initials.
Levine attributes the success of Sassco and the Kasper line to what he calls the “David Warren philosophy,” referring to the late founder of The Warren Group, who became his boss at Bobbie Brooks.
“You can’t run after business and try to jump on every trend,” the reserved executive said. “You have to stand for something and stick with it. We’ve had slow, steady growth, from a volume of $20 million 15 years ago to $360 million this year.”
Its flagship brand, Kasper for ASL, was introduced in 1984 and is the largest division with a volume of about $185 million. It has become the dominant better-price suit label in department stores. Sassco also makes the Le Suit moderate-price line, with a volume this year of about $50 million, and the better-price Kasper Dresses, which predates Kasper suits by about a year and will have sales of about $50 million this year.
In addition, Sassco makes bridge-price Albert Nipon Suits and the designer-price Nolan Miller suit and dress collection. Each of those lines will register about $15 million in sales this year.
The Le Suit division also makes private-label suits for such chains as J.C. Penney, Sears, Roebuck & Co. and Montgomery Ward.
The retail strategy of marketing Kasper suits and dresses through in-store shops is almost two years old, Marks said, with about 600 shops in place at retailers like Dayton Hudson, Macy’s, Federated Department Stores, May Co., Carson Pirie Scott and Dillard Department Stores.
The year-old Kasper & Co. sportswear line is on track to reach $40 million in volume this year, Marks said, and is adding knits for fall 1995.
“We feel this company is still in its infancy,” Marks said. “We’re in Europe now, but see greater opportunities there. We would also like to sell more in Canada and Mexico and the Orient.”

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