Guez family fiasco (1985)
Guez-Sasson controversy heats up with suits.
From: WWD Date: May 3, 1985
Author: Wilkinson, Peter
NEW YORK (FNS) -- The Guez brothers --the family behind the Sasson label -- are caught up in a growing controversy with accusations ranging from theft of business documents to death threats made by Paul Guez against a former bookkeeper.
* The bookkeeper claims Paul Guez whacked him with a pool rack and threatened to kill him.
* Brothers Hubert and Gerard Guez charge Paul burglarized their Seventh Avenue office, making off with corporate and personal business records.
* The Manhattan District Attorney is reportedly investigating allegations of embezzlement by former Sasson employees.
* In court, Hubert Guez has revealed a pattern of multimillion dollar loans from the company to the Guez brothers.
* Paul Guez sued his former law firm Thursday, seeking 25 cartons of documents he claims the firm has refused to return to him.
The current Guez family furor peaked last month when a former Sasson bookkeeper, Ely Dioquino, sued Paul Guez for $27 million in state supreme court in Manhattan. Dioquino claimed the apparel executive and two bodyguards roughed him up at Guez's East 66th Street apartment on March 22 in an attempt to "interrogate him."
Guez and the bodyguards, identified only as "Richard" and "Daniel", threatened to kill Dioquino by pointing two loaed pistols at his head, hit him over the head with a ledger book and struck his hand with a pool ball rack until the rack broke, the suit says.
Claiming he was kept prisoner at the apartment for three hours, Dioquino says he has suffered "serious metal, emotional, neurological, psychological and psychiatric damage."
The complaint also contends that Paul Guez and other Sasson employees, including controller Frank Brovenor and Paul Guez's brother Gerard, have "harassed, threatened, browbeaten and otherwise intimidated" Dioquino even after the suit was filed. This was done, the suit says, to persuade Dioquino to drop "criminal charges" agains the defendants.
Asked whether those charges were related to an investigation by the District Attorney's office, Dioquino's lawyer Ilene Merdinger declined comment except to say: "We have spoken to the DA's office."
Repeated attempts to reach Paul Guez and his lawyer David Breitbart were unsuccessful.
An assistant district attorney handling the case declined to say whether a grand jury had been convened and refused to confirm the existence of any state probe involving thefts from Sasson.
In the meantime, allegations of document thefts and disclosures about unusual Sasson loan procedures have come to light during court hearings in a separate Guez family spat, dubbed a "fratricidal vendetta" by brother Hubert Guez. The feud is over the company's linchpin -- the 72-year Sasson license for women's jeans -- that Paul Guez granted to his brothers in 1981 when he tired of running the manufacturing end of the business.
At issue is what percentage of jeans sales Pau Guez's younger brothers owed him under the Sasson license. Revenue from the deal exceeds $250 million, according to court records.
Paul Guez, who runs Sasson Jeans, Inc., the New York-based licensing company, claims he should be getting 5 percent and cites an agreement providing for royalty payments of 5 percent and advertising royalties of 3 percent. Hubert and Gerard Guez -- who oversee the West Coast manufacturing arm, Sasson Jeans, L.A. -- point to a second contract specifying only the 3 percent advertising royalty.
Furthermore, Sasson L.A. charges that Paul Guez accepted 3 percent payments without objection until 1982, when he abruptly announced he was canceling the pact unless the ante went to 5 percent.
Paul Guez, in court papers, contends he accepted the lower figure only on a temporary basis -- as a gesture of generosity to help the brothers' then-sagging jeans business.
Angered over PAul Guez's threat to terminate the deal, Sasson L.A. sued for $10 million last year, claiming the elder Guez's attempt to end the agreement had "no valid business purpose."
"In his emotional and misguided way of thinking, we have shown disrespect to him by successfully building up a business without following his instructions and advice," says Hubert Guez in an affidavit.
Central to the complicated dispute is whether either of the licensing pacts is, in fact, the actual deal. This question has arisen due to Huber Guez's statement that the brothers agreed among themselves that, for at least a year, no royalties would actually be paid.
Instead, according to Hubert Guez's affidavity, the royalties were to be offset by transferring receivables from the Los Angeles company to Paul Guez's Sasson Jeans, Inc. -- receivables created by large loans the Guez's themselves took from Sasson Jeans L.A., Hubert Guez disclosed.
Court papers said that not until July 1982 did actual royalty payments begin to flow between the companies -- royalty payments of 3 percent. And later, only after a "major emotional blowup" between the brothers, did Paul Guez make his demand for an additional 2 percent, according to Hubert Guez's affidavit.
With the lawsuit pending in Manhattan federal court, charges have surfaced surrounding the disappearance of certain files from Sasson L.A.'s offices here last Thanksgiving.
Paul Guez's brothers contend the missing files include financial reports about one Sasson licensee, record of alleged payments to an officer of the licensee and even information about Gerard Guez's personal bank account.
In affidavits filed in federal court, Hubert and Gerard Guez say they are convinced Paul Guez is the thief. "I believe the missing documents were clearly stolen by Paul," Hubert Guez said in court papers. "This outrageous conduct is unfortunately one more instance of the increasingly disturbed, irrational and paranoic behavior with which my borther Paul has increasingly become afflicted."
Brother Gerard Guez leveled a similar accusation. According to his affidavit, Paul Guez called him after the alleged theft, asked to "make peace," and showed him his own bank records. Gerard Guez said he had been told by "six differnet people," including Paul Guez himself, that Paul Guez had obtained the documents. "You're a sick man," Gerard Guez says he told Paul Guez "You're not looking for peace."
Another Sasson L.A. executive, Conrad Nadell, told in an affidavit how Paul Guez called him and quoted from various Sasson L.A. financial records and Gerard Guez's checkbook. "He wanted me 'to be a Kissinger'" and mediate the dispute with his brothers, Nadell said.
But when Nadell warned him the litigation could destroy the company, Paul Guez is said to have responded, apparently referring to the documents: "You haven't seen anything yet -- this will be better than 'Dynasty.'"
As a result of the alleged theft, Sasson Jeans L.A. has asked a federal judge, John E. Sprizzo, to find Sasson Jeans, Inc., in default in the pending lawsuit. Sprizzo has yet to rule on the request, and, according to Sasson L.A. attorney, Donald Kreindler, the case lies dormant while settlement talks are under way.
However, Sprizzo has commented in court that Paul Guez "is really going to be in a lot of trouble" if he is ultimately found to have absconded with the missing papers.
"His conduct would be criminal and he is subject to indictment," Sprizzo told Sasson Jeans, Inc., lawyers in a court hearing.
One of the company's attorneys, Edward Brodsky, refused to discuss the case, commenting through his secretary he had "nothing to say to the press about Sasson."
Apart from the charges about missing files, the case has also disclosed information about procedures followed at Sasson concerning loans made by the corporations to the brothers.
Testifying before Sprizzo, Hubert Guez said that if one of the brothers needed something, "he would write the check to himself."
Asked about these transactions, the Algerian-born Huber Guez responded: "There was the officer loans, it was not generosity, your Honor, it was the deal which govern our family for 15 years" (sic).
"Your honor, we would book this as officer loans to avoid tax liability," Hubert Guez went on. "If you want to avoid the taxes you have to look like you have an obligation to pay it back."
Hubert Guez later testified that Sasson would carry officer loans of "up to million and a half, two million dollars," and, at the end of the year, "if the sums . . . were not too big, we would write them as income."
"If they were big, like you cannot at the end of the year take a million and a half as bonus, we would carry them as receivable and asset for the company and obligation of the officer," he said.
Hubert Guez said the brothers "always had a reason's to take loans from Sasson, and that 60 percent of the time the loans were used to purchase "assets together." Guez did not specify what assets were bought, but added that the Guez's salaries alone were always more than enough to "coer our need."