NEW YORK — Language, one of downtown New York’s hottest designer retailers and a rising star with its own house-designed collection, has run into serious problems with its financial backer and is facing a legal challenge that could shut it down.

This story first appeared in the November 12, 2003 issue of WWD. Subscribe Today.

However, the designers behind the line vowed on Tuesday to fight back and keep the business going.

Bronner International S.A., the majority shareholder of Language, filed a petition in the Supreme Court of the State of New York on Friday seeking the dissolution of the company, said Marcos de Moraes, a partner in the South American investment firm. De Moraes’ company has been an investor in Language since it was opened in 1998 by the husband-and-wife team of Ana Abdul and Luis Felipe “Lipe” Medeiros at 238 Mulberry Street in NoLIta.

Medeiros charged back on Tuesday that Bronner is trying to take control of the company, “and this is their strong arm tactic to try to do it.”

The Language store initially carried modern furniture and artwork, in addition to clothes from labels such as Chloé, Bella Freud, Matthew Williamson, Lucien Pellat-Finet, Sophia Kokosalaki and Philip Treacy — pieces merchandised as if they came directly from Abdul’s closet. Two years ago, Abdul began designing her own collection under the Language label featuring vintage fabrics reworked into dresses and fur coats that were featured prominently in magazines and in an in-store boutique at Henri Bendel.

Since moving to New York from Brazil, Abdul and Medeiros also have become regulars on the New York society scene, drawing a clientele that included Fernanda Niven, Celerie Kemble, Rachel Peters and Lulu de Kwiatkowski.

The collection grew to about $3 million in sales last year and had orders for its spring collection in 82 doors, according to de Moraes. The company employs 31 people in its SoHo offices.

Employees at Language were informed of the dispute with Language’s backers on Tuesday, according to some workers there, although it was not immediately clear what the fate of the company would be. De Moraes said, as the majority shareholder of Language, Bronner International was looking to dissolve the business because of concerns about its management.

Bronner alleged in a statement, “Mismanagement and unauthorized use of the company’s resources for personal purposes by its executive officers…have brought the company to financial ruin.”

In a phone interview, de Moraes charged that Language’s officers had spent in excess of $250,000 in expenses that had never been approved by the board. Because of his friendship with Medeiros and Abdul, who is cited in Bronner’s statement as Ana Abdulmassih, de Moraes said he did not have reason to mistrust the financial statements he had previously received from Language’s management.

But when Language was late in filing a balance sheet in August, de Moraes was told that within 10 days, the company would not have enough money to cover its payroll. De Moraes, who is based in São Paulo, Brazil, said he personally flew to New York to deposit a $435,000 check to make certain its creditors were paid.

“We’ve allowed them to have a lot of freedom,” de Moraes said. “We believed everything we heard from them was true. We were really surprised because we thought the company was doing well, but we found out they were hiding information from us and using company funds extensively for personal purposes. We found out a short time before the company ran out of funds that the Medeiroses bought a $34,000 painting for their apartment with company funds.”

Medeiros said the painting was initially included in an exhibition at the store and that he later purchased the painting for himself, and not with the company’s money.

“Both me and Ana believe in the future of the company,” he said. “We’re going to go to court to defend ourselves against these allegations that are not true.”

Efforts to negotiate a restructuring of the company ended in a stalemate, de Moraes said, adding that it would be “unacceptable” for Bronner to remain partners with Abdul and Medeiros. Bronner, which is based in Uruguay, develops brands such as beverage and fashion labels. In Brazil, its holdings include the Mandi and Flor fashion lines.

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