Could Nike and Former Top Exec Face Legal Action Over Resale Saga?

Over the past 48 hours, the complicated saga involving ex-Nike executive Ann Hebert and her son, Joe, a lucrative sneaker reseller, has garnered more headlines, tweets and social media posts than any buzzy shoe drop ever could.

And it’s with good reason.

The multi-layered story has served to lay bare the many challenges and opportunities defining the lucrative and, at times, shady world of sneaker resale. It’s brought to light major issues and questions surrounding corporate governance, greed and power. In a time of enormous racial reckoning, the saga has even called attention to the topic of white privilege.

And that’s not even mentioning the number of comments on Instagram and Twitter from parents bemoaning the ability of adolescent and adult children to derail their parents’ lives. (Hebert, a 25-year Nike veteran, resigned from her role this week after a Bloomberg Businessweek report detailed Joe’s successful sneaker resale venture, West Coast Streetwear.)

Indeed, each layer could easily necessitate its own ethical analysis. However, the question underpinning much of the headlines is the legal culpability for Nike and Hebert.

And, according to insiders, there likely isn’t much for either party at this juncture.

For one, across the internet, there has been much ado about “conflict of interest,” but New York-based fashion law attorney Elizabeth Kurpis told FN that the pure existence of a conflict of interest is “not necessarily a signal of impropriety or unethical [behavior].” In other words, even if a conflict of interest existed between Hebert’s role at Nike and her son’s business, which she purportedly helped finance, it doesn’t necessarily make it illegal on its own. (In fact, on Nike’s corporate site, it outlines its conflict of interest policy, and the Swoosh states: “Potential conflicts can often be resolved with an open and honest discussion. Remember: having a conflict of interest is not necessarily a violation of our Code, but failing to disclose it is.”)

“For instance,” Kurpis added, “should Nike do business with a company that is owned by one of their executives, so long as it is approved independently — that is, the executive is recused from voting or making any decision regarding the relationship — the conflict of interest could survive.”

Nike spokeswoman Sandra Carreon-John reaffirmed to FN today what she told Bloomberg for its headline-generating piece: “Based on the information disclosed to us at the time of our review, there was no violation of company policy, privileged information or conflicts of interest, nor is there any commercial affiliation between WCS LLC and Nike, including the direct buying or selling of Nike products.”

According to Kurpis, while most states have their own conflicts of interest laws, generally, each requires at “the bare minimum” that companies implement and enforce “industry specific policies and compliance procedures” in order to safeguard against any negative effects of a conflict of interest — something it appears Nike did.

“As Nike stated, Hebert disclosed to the company that her son was in the business of reselling sneakers back in 2018 and it was determined that [no violation occurred]. This informs us of two things: (1) that Hebert considered that her son’s business could potentially be a conflict of interest and self-reported it to the company, and (2) that Nike has a compliance policy in place regarding conflicts of interest, which was reviewed — likely by their legal team — in light of her disclosure and was ultimately dismissed,” Kurpis explained.

“Therefore, assuming Hebert was completely honest in her disclosures, to the best of her knowledge, and so long as Nike properly followed their own policies and procedures and those policies and procedures are written in accordance with relevant law, Nike wouldn’t likely be culpable for letting Anne keep her job. However, had it been found that a conflict did exist, the most common solution would have been to remove Hebert from any instance where the conflict could affect her decision-making or, if necessary, fire her.”

Still, what cannot be understated is the ability of this situation to erode confidence in Nike’s policies, as well as its standing as a good and ethical corporate player. Speaking to FN, industry insiders have expressed concern about Nike’s assertion that Hebert did not violate its policies — in other words, some are questioning whether the policy itself is sound.

“We deal with [ethical dilemmas] everyday: People will walk into one of our stores and offer $30,000 to secure a Nike drop — or an unauthorized dealer from another country will walk in and say, ‘I’ll give you a million dollars if you let me buy Nike product through your [authorized account],’” an owner of a popular chain of sneaker boutiques that is authorized to sell Jordan and Nike products told FN. “And we say ‘no.’ We refuse to hike up the costs of limited-edition Jordan and Nike releases on principle. We follow the rules. So it’s concerning to think that we’re adhering to the guidelines, and the people who are making the guidelines may not be doing the same.”

That’s not to say that this source and others who have bemoaned the potential issues at Nike won’t admit that resale — an area that the Swoosh does not play in directly but is likely beneficial for the hype it induces — as well as the broader sneaker market isn’t rife with ethical issues notwithstanding the athletic behemoth.

“What some people don’t realize is that sneaker retailers that carry Nike and other big-brand sneakers have access to information regarding drops much earlier than the average consumer,” said Kurpis. “Further, with the help of bots and other third-party apps, resellers can effectively see inventory numbers for any sneaker they are looking for at retailers carrying such items and can use such information when making bulk orders. Bots are capable of placing these orders within seconds of any drop, faster than any human would be able to do on their own.”

Indeed, the authorized sneaker shop proprietor who spoke with FN reinforced Kurpis’ point: “Bots are very common. Even if you don’t have a resale relationship with a brand, you can go and purchase a bot, which is just a program that somebody has written that will assist the consumer by adding an item to their cart, authorizing a payment with whatever card they’ve previously put on file and ship to the address they want. And so it gives you the opportunity to beat out an actual traditional consumer who has to ‘add to cart,’ click and type in all their information and so on.”

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