Jay-Z Ordered To Testify In Federal Investigation Of Company That Bought The 'Roc'

May 4, 2018
Originally published on May 4, 2018 5:26 pm

Since its founding in 2008, Roc Nation — a business that encompasses artist and athlete management and development, film and television (the company launched a television production arm yesterday) — has been, outside of the booth, the nexus of Jay-Z's many business interests. Over the last decade, Jay-Z, born Shawn Carter, has built Roc Nation into a relatively low-key entertainment powerhouse, overseeing the careers of Rihanna, Kevin Durant, Meek Mill, Damian Marley, DJ Khaled and Grimes, among many others.

It's not his first empire. The year before Roc Nation was founded, Jay-Z sold the "Roc" suite of trademarks — centered around Rocawear, the clothing line he launched and (wisely and relentlessly) plugged throughout his ascent and tied to his former label, Roc-A-Fella — for over $200 million to the brand management company Iconix.

That sale has now culminated in a federal judge granting the Securities and Exchange Commission's request that he be forced to testify in its investigation of Iconix after the rapper ignored two previous subpoenas from the SEC, issued last November and this February. The rapper will appear in court next Tuesday.

In its first statement, the SEC says it is investigating the Iconix Brand Group, which manages and licenses clothing brands while maintaining little overhead in the way of inventory, for "making materially false or misleading statements in connection with the offer or sale of securities, among other things." The SEC's application to compel Jay-Z to testify points out that the Commission does not consider Jay-Z to have "violated provisions of the federal securities laws at issue in the investigation."

"We are aware that the SEC is seeking information on Iconix' s financial reporting," reads a statement from Roc Nation provided to NPR before the judge's order. "Mr. Carter had no role in that reporting or Iconix' s other actions as a public company. Mr. Carter is a private citizen who should not be involved in this matter."

According to Iconix's most recent financial filing, it still maintains a joint venture with Jay-Z's company Roc Nation, though Roc Nation hasn't received royalties from the partnership since 2015.

As mentioned, Jay-Z promoted the "Roc" often as he was building his business, brand — mentioning it at least 21 times, according to a lawsuit against him from... Iconix, filed in 2015. (The suit refers to those in-song mentions as "rapper-vertisements" — "rapvertisements" must have been taken). In the suit, Iconix claims that after it purchased the trademarks to everything "Roc" for $204 million in 2007, Jay-Z continued to use or license the "Roc" to brand clothing and his company, the aforementioned Roc Nation. They also accuse Jay-Z of attempting to transfer the value of "Roc" branding to Carter's new company, Paper Plane.

Iconix claims its "Roc" business has generated $1 billion since it purchased the marks. In March 2016 and 2018, as the SEC notes, Iconix wrote down — an admitted reduction in value — of Rocawear by a combined total of $203 million. The SEC's investigation would appear, in part, to focus on this deal and the values the company ascribed to it and others.

Iconix has been accused of, and sued over, similar practices in the past, including one class action suit brought against it by its shareholders in June, 2015. In it, they accuse the company of misrepresenting the value of the brands it manages, as well as misreporting its revenues. When that class action suit was filed three years ago, Iconix's stock was worth around $25 per share (and around $42 the year prior). At market close yesterday, it was trading at $0.59, down 7 percent for the day.

Requests for comment from Iconix were not returned.

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