UPDATE 2-Former Iconix Brand CEO charged with accounting fraud in U.S.

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NEW YORK (Reuters) – Iconix Brand Groupo Inc (ICON.O) founder and former Chief Executive Officer Neil Cole has been charged with accounting fraud, while the former chief operating officer has pleaded guilty to related charges and is cooperating with authorities, federal prosecutors announced Thursday.

FILE PHOTO: Neil Cole, Chief Executive Officer of Iconix, speaks at the Reuters Retail and Consumer Summit in New York June 19, 2007. REUTERS/ Meredith Davenport

The former executives inflated the apparel licensing company’s revenues by convincing a Hong Kong-based company to overpay for stakes in joint ventures with Iconix, according to an indictment unsealed in federal court in Manhattan.

The Hong Kong company, which was not named, agreed to the overpayments on the condition that it would be reimbursed through sham consulting or marketing fees, according to the indictment.

Through the scheme, Iconix’s revenues were inflated by a total of about $13 million over three separate joint venture agreements in 2013 and 2014, the indictment said.

Cole, 62, is charged with 10 criminal counts, including securities fraud, conspiracy and making false statements to the U.S. Securities and Exchange Commission.

Former Chief Operating Officer Seth Horowitz, 43, pleaded guilty on Dec. 2 to five counts, also including securities fraud, conspiracy and false SEC filings, under an agreement with prosecutors.

Both men are facing separate civil allegations from the SEC.

Lorin Reisner and Richard Tarlowe, counsel for Cole, said the former CEO had acted lawfully and properly in all respects, and the case should not have been brought.

“All of the transactions at issue were fully reviewed and approved by Iconix’s legal, finance and accounting professionals,” the counsel added.

Cole stepped down from the top job at Iconix in August 2015, after about 10 years at the helm.

Reporting by Praveen Paramasivam in Bengaluru and Brendan Pierson in New York; Editing by Shailesh Kuber and Lisa Shumaker

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