Shawn C. Carter, aka Jay Z, didn’t need to appear before Manhattan Federal Court Judge Paul Gardephe on Thursday, but he now has to face some tough questioning from attorneys for the Securities and Exchange Commission.
Those questions would include the value of the Rocawear trademark and his involvement with the brand after its sale to Iconix Brand Group, the Carter-affiliated companies that did business with Iconix, and Carter’s knowledge of the intent connected to those transactions.
At a hearing Thursday afternoon, Judge Gardephe ruled that Carter — who is known professionally as Jay Z — can no longer avoid questioning by the Securities and Exchange Commission. Carter’s attorney and lawyers for the SEC agreed to a date of May 15 for the SEC’s deposition of Carter. Exactly how long for the deposition, as well as its location, was left to be determined between the parties.
After two attempts to subpoena Carter for a deposition in which he and his lawyers failed to provide a date for when he would appear for testimony, the SEC resorted to an enforcement action last week.
Carter sold his apparel brand Rocawear to Iconix in 2007 for $204 million. The parties also said there would be some joint ventures between them in connection with the brand. But Iconix later wrote down $169 million in connection with Rocawear and this year wrote down another $34 million. The SEC is interested because it has been probing alleged accounting irregularities at Iconix since 2015, and it said the impairment charges for Rocawear is an important part of its probe. Iconix in November 2015 said it would need to file restatements to certain financial reporting periods. The current management team at Iconix is different from the one in charge when the SEC began its investigation into the accounting at the brand management firm.
In court documents, the SEC said it wants Carter to answer some questions, and that it plans to inquire about, “among other things, Carter’s joint ventures with Iconix.” That raised some issues with Carter’s attorney Alex Spiro, who said that without certain guidelines, the SEC is “overreaching by trying to compel Mr. Carter to testify without reasonable limitation.” Carter submitted a declaration with the court, setting forth his rehearsal schedule for his upcoming tour, as well as his worldwide tour start date beginning on June 6 and ending Oct. 4. He also noted that rehearsals “cost millions of dollars” and that giving testimony would “impair the work” of those who are working with him to prepare for the tour. The SEC told Judge Gardephe in his response papers that Carter has been “ducking” testimony for months.
It seemed that the parties were in partial agreement over Carter needing to be present for one day of testimony — Spiro suggested one day for “eight hours” — but then debated over whether the deposition could continue beyond the one day.
Judge Gardephe, who read his decision in court Tuesday, said he has determined that the SEC’s investigation is “being conducted for a legitimate purpose,” and that the testimony that is being sought of Carter “may be relevant.” And while court documents submitted by Carter’s lawyers noted that nearly 11,000 pages of documentation have already been provided to the SEC, Judge Gardephe said that Carter’s testimony might include information not already in the SEC’s possession.
“The testimony has been delayed for five months, and I do not intend to delay it any longer,” the jurist said.
As for how long a session, Judge Gardephe told the parties to try to conclude the deposition in one day, but said if that’s not possible, “The SEC may seek permission to continue testimony over to another day.”