Why the SEC Is Forcing Jay-Z to Testify About Iconix-Rocawear Sale

The Securities and Exchange Commission slapped “Empire State of Mind” rapper and business mogul Shawn “Jay-Z” Carter with an investigative subpoena seeking to understand why he shouldn’t have to testify at a May 8 hearing about the $204 million sale in 2007 of his urban-lifestyle Rocawear apparel label to brand licensing management company Iconix Brand Group.

At the heart of the matter is whether the transaction violated federal security laws, Reuters reported. The SEC also is seeking details about Carter’s joint venture businesses with Iconix, though in a statement to CNBC, a representative for the 48-year-old rapper said the “Hard Knock Life” hitmaker played no role in any of Iconix’s financial reporting or other actions as a public company. Carter was a no-show both times the SEC previously ordered him to appear in November 2017 and in February 2018. He also failed to offer alternative dates when he would be available to testify, according to Reuters.

Following the March 2007 sale, Carter retained his stake in Rocawear and stayed on as the label’s chief creative officer, overseeing marketing, licensing and product development.

Launched by Carter in 1999, Rocawear quickly became a favorite clothing label among the rapper’s devoted fans as well as lovers of urban-inspired street style. Today, the Rocawear brand has branched out beyond that initial urban streetwear appeal and is carried in more than 2,500 doors, including department stores such as Macy’s and Dillard’s, with more than 16 product categories ranging from clothing and shoes to fragrances and watches. Rocawear, which at one point generated more than $700 million in annual revenue, is sold in more than 25 countries, including Brazil, throughout Asia, Europe, the Middle East and North America. However, Rocawear hasn’t performed well for Iconix in recent years: The company took a $169 million write-down on the label two years ago, and it reported another $34 million write-down this year.

Meanwhile, on Monday the rapper’s lawyers called the SEC’s demand a “celebrity hunt” in a 15-page legal memorandum, according to USA Today. “The SEC continues to insist on meeting Mr. Carter in person for an unlimited period of time,” Jay-Z’s lawyers wrote. “The upshot imposes unreasonable burdens on Mr. Carter and raises serious questions about whether this exercise has transcended any investigative purpose and crossed over into a celebrity hunt.”

Editor’s Note: This story was reported by FN’s sister magazine Sourcing Journal. For more, visit Sourcingjournal.com.

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