Jay Z is in the mix of an investigation by the Securities and Exchange Commission (“SEC”). The government agency – which is tasked with enforcing U.S. federal securities laws and regulating the securities industry and the nation’s stock exchanges – has filed an enforcement action against the music mogul seeking an order from a New York federal court that will force him to comply with an investigative subpoena for his testimony after he failed to comply with two previous SEC subpoenas.
According to the SEC’s application and supporting documentation, which were filed in federal court in New York on Wednesday, the SEC is interested in hearing from Jay Z, born Shawn Carter, about “potential violations of the federal securities laws related to the financial reporting of New York-based Iconix Brand Group, Inc.” The SEC asserts that “in March 2016, Iconix publicly announced a $169 million [reduction in value] of Rocawear, and in March of this year, Iconix announced a further write down of $34 million.”
You may recall that in 2007, Iconix paid Carter upwards of $204 million for the right to use the name (and other intellectual property rights) of Rocawear, the apparel brand that the rapper launched in 1999 alongside Dame Dash, on an array of products. Following that transaction, the SEC alleges that “Carter and Iconix maintained publicly-disclosed partnerships related to the Rocawear brand.”
The SEC initially issued a subpoena for Carter’s testimony on November 16, 2017, and in February 2018, issued a second subpoena for Carter’s testimony. “Carter failed to appear as required by the subpoenas and, through his counsel, Carter has declined to provide any additional dates on which he will agree to appear for investigative testimony,” the government entity stated on Wednesday.Jay Z’s lawyer, Alex Spiro says that Jay Z “had no role in that reporting or Iconix’s other actions as a public company.” He further asserted, “Mr. Carter is a private citizen who should not be involved in this matter.”
The investigation, which does not mean that the SEC or its staff have determined that Carter has violated provisions of the federal securities laws, comes on the heels of a lawsuit filed against Rocawear, Jay Z, Major League Baseball Properties and other entities in New York federal court, alleging that Rocawear ran afoul of their licensing agreement by enabling hatmaker New Era to release special “Roc Nation” baseball caps.
In its complaint, Iconix argued that as a result of the New Era deal, “Carter and his various companies…have deliberately undermined a series of agreements, after receiving millions in substantial compensation from [Iconix], by continuing to use and exploit in business the very property already conveyed to Iconix by contract.”
As of last month, that case – Iconix Brand Group, Inc. et al v. Roc Nation Apparel Group, LLC et al, 1:17-cv-03096 (SDNY) –was still underway in a New York federal court.
UPDATED (May 8, 2018): A federal judge in New York on Tuesday ordered Jay-Z to testify on May 15 in an investigation by the U.S. Securities and Exchange Commission involving the sale of the rapper’s Rocawear clothing brand to Iconix Brand Group Inc. According to U.S. District Judge Paul Gardephe, Jay Z’s “testimony has been delayed for five months, and I do not intend to tolerate any further delay.”
Jay Z was represented at a hearing on Tuesday by his lawyer, Alex Spiro, who argued on the rapper’s behalf that forcing him to testify at length would interfere with his preparations for an upcoming world tour, and that his testimony would not be relevant. Still yet, the rapper’s counsel asked the judge to limit Jay Z’s testimony to a single day, but the SEC refused the request, stating that such a time limit would create an incentive to “run out the clock.”
Spiro said in a statement to TFL: “We are pleased with the decision.”