Legal News

When Lawsuits Backfire: The Georges Marciano Tale

By Ashby Jones

If there’s something uniquely American about the rags-to-riches-to-rags trope, it strikes us that there’s something perhaps even more American about a rags-to-riches-to-rags-because-of-too-much-litigation story.

According to this full-blown, 2300-word feature in the LA Times on Tuesday, that roughly explains the American journey of Georges Marciano, a man from France who struck riches in the 1980s with his founding of Guess Jeans.

Two paragraphs high in the story sum up the rise and fall:

A knowledgeable [source] might have gone on to describe Marciano as a classic American success story — a poor immigrant who amassed a fortune through hard work and business savvy. The [source] might have noted Marciano’s two . . . palatial residences on Sunset Boulevard, his Boeing 737, the art collection boasting works by Marc Chagall and Ed Ruscha, the cellar of priceless wines, the homes in Utah and France, and his self-financed if little-noticed campaign for governor.

These days . . . [t]he Ferraris are gone. Creditors have laid claim to Marciano’s assets. The gubernatorial campaign is dormant, and the great man himself has disappeared.

“I do not know where Mr. Marciano is residing at this time,” his spokeswoman conceded recently.

According to the story, Marciano’s fall cannot be explained by a “Ponzi scheme or the mortgage meltdown.” Rather, it’s the product of lawsuits.

The LAT gives great detail on the twists and turns that precipitated Marciano’s fall. There was a bitter divorce, allegations of trysts with applicants for au pair positions, and allegations of drug abuse.

What ultimately resulted was a conviction on Marciano’s part that he was being stolen from by former employees. Law enforcement authorities looked into the allegations, but came up empty. So Marciano took matters into his own hands.

He sued seven former employees, seeking millions he alleged were missing. According to the LAT: he “went through law firm after law firm — 17, by the judge’s count — and spent $12 million in legal and accounting fees . . .”

And a curious thing happened on the way to Marciano’s planned recovery: The employees countersued for libel and intentional infliction of emotional distress. And at trial, they won big. The jury awarded five former employees $74 million each in July. The judge added $55 million in damages to Iskowitz, his wife and business partner the following month, for a total of $425 million. (The judge later reduced the award to $260 million.)

After the verdicts, the employees moved to seize Marciano’s assets. An accountant working for Marciano placed their value at $175 million in August. Harrell put the figure at $450 million to $500 million.

Marciano declined repeated requests for an interview, but sent an e-mail to the LAT saying he welcomed coverage of his case and wanted a reporter to review a 50-page packet that included clippings about crooked government officials and letters to a former attorney bemoaning developments in court. In a statement issued through a spokeswoman, he vowed to appeal the case vigorously.

“I will fight this case to the Supreme Court if necessary because the constitutional protections that we all rely on have been denied,” the statement said.

Full post as published by Law Blog - WSJ.com on December 15, 2009 (boomark / email).