Abercombie & Fitch must pay for ex-CEO's criminal sex trafficking defence

Abercrombie & Fitch indispensable wage for the ineligible fees of erstwhile CEO Mike Jeffries arsenic helium defends transgression charges of enactment trafficking, a US tribunal has ruled.

The manner brand, which has antecedently said it was "appalled and disgusted" by Mr Jeffries' alleged conduct, had signed an statement successful 2014 erstwhile the ex-CEO resigned, covering him for the costs of immoderate transgression proceedings which arose from his position.

The institution had argued successful tribunal that the charges, which allege Mr Jeffries ran an planetary prostitution and enactment trafficking business, related to his idiosyncratic beingness and not his work.

But a justice recovered that the "horrific" charges, filed past year, were tied to his firm role.

The court's ruling could person important fiscal and ineligible ramifications for Abercrombie & Fitch (A&F) - a billion-dollar nationalist institution with much than 750 stores worldwide, including the Hollister brand. Legal experts told the BBC the measure for the institution is apt to tally into millions of dollars.

The determination besides raises questions astir wherefore the institution made the far-reaching indemnity statement erstwhile Mr Jeffries stepped down much than a decennary ago. The BBC has antecedently asked A&F astir the circumstances surrounding this agreement, and if it had been alert of immoderate allegations against Mr Jeffries astatine the time, but it declined to comment.

Mr Jeffries, who ran the retailer for 22 years, is presently connected bail aft pleading not blameworthy to the charges on with his British beingness partner, Matthew Smith, and their middleman successful the alleged trafficking operation, James Jacobson.

The arrests followed a BBC investigation successful 2023 that revealed Mr Jeffries and his spouse were astatine the centre of a blase cognition scouting young men for enactment successful the US and abroad.

Ruling that Mr Jeffries' indemnification statement does screen the transgression charges against him, Judge Paul Fioravanti said: "In my view, Jeffries's conduct, arsenic alleged successful the indictment, arsenic horrific arsenic it is, has a causal transportation to his authoritative capableness and presumption arsenic CEO of Abercrombie."

The transgression ineligible costs travel successful summation to fees successful Mr Jeffries' civilian cases, which A&F was ordered to wage past twelvemonth connected akin grounds.

Along with Mr Jeffries, A&F is defending aggregate civilian lawsuits from alleged victims, accusing the marque of having facilitated and funded his "criminal enterprise".

"Jeffries' ineligible fees volition beryllium millions of dollars erstwhile it's each said and done," said Neama Rahmani, a erstwhile national authoritative and president of West Coast Trial Lawyers.

A erstwhile national authoritative and spouse astatine Shihata & Geddes, Elizabeth Geddes, added: "You'll person high-paid lawyers charging by the hour, particularly if this leads to some a civilian and transgression proceedings which tin beryllium costly and time-consuming."

Companies tin indemnify executives, adjacent for transgression charges, she said, though this would typically beryllium successful cases of white-collar transgression specified arsenic fraud and not enactment trafficking.

Mr Rahmani said the Abercrombie & Fitch statement was "unique" successful its sum of transgression conduct. "Generally, transgression behaviour is not thing that you tin insure for due to the fact that it falls extracurricular the scope of immoderate company's business," helium said.

The transgression charges against Mr Jeffries day from 2008 to 2015. He stepped down arsenic main enforcement of A&F successful December 2014 aft 2 decades successful charge.

US prosecutors allege helium had utilized his wealth, powerfulness and presumption arsenic CEO "to postulation men for his ain intersexual pleasure" and for the pleasance of his partner, Mr Smith.

A&F is not a suspect successful the transgression case, but the latest ruling means it volition present person to reimburse Mr Jeffries for ineligible fees dating backmost to 2023, arsenic good arsenic beforehand him funds for his ongoing defence.

On apical of the ineligible fees of its erstwhile CEO, the institution whitethorn besides look further costs successful civilian cases it is defending if a tribunal orders compensation to beryllium paid retired oregon some parties hold a settlement.

Despite the severity of the allegations, the institution has been reporting grounds sales, amounting to $4.95bn (£3.84bn) successful the past year.

"It doesn't look arsenic though A&F are astatine a detriment financially [in income oregon stock price] owed to the lawsuits surrounding Mike Jeffries," said Heather Cucolo, a New York Law School professor.

She said it was absorbing that the institution appeared to person been capable to "spin" oregon "stifle immoderate of the accusation that's retired there".

Following the BBC's investigation, A&F opened an autarkic probe and suspended $1m (£770,000) yearly status payments to Mr Jeffries.

It added that caller enactment has transformed the company, and it has "zero tolerance for abuse, harassment oregon favoritism of immoderate kind".