Kandy Kiss Alleges a Former Executive Stole Its Business With Target
The clothing business can be a cutthroat industry, especially in these times of retail challenges and shifting consumer shopping habits.
So when Kandy Kiss Inc.—a longstanding enterprise based in Van Nuys, Calif.—saw millions of dollars in sales to Target Corp. suddenly dry up and be placed with another company, it decided to investigate.
In court papers filed in Los Angeles County Superior Court in late July, Kandy Kiss Inc. alleges that its former president of sales and acquisitions, Mauricio Betancur, stole several top Kandy Kiss employees who dealt with Target and siphoned off business to another firm, called Secret Charm, where Betancur later worked. Adir Haroni, the owner of Secret Charm, was also named in the Kandy Kiss cross complaint as well as several other businesses related to Betancur and numerous individuals who worked at Kandy Kiss and Target.
Kandy Kiss said the tens of millions of dollars it lost in sales made up a substantial portion of its revenues.
After losing the Target business, Kandy Kiss did an assignment for the benefit of its creditors, an informal bankruptcy. Province Inc., the assignee, then proceeded to sell the Kandy Kiss assets to Blended Apparel in Van Nuys, which took over Kandy Kiss’s inventory and orders.
Shortly after, in February, Betancur and several other creditors put Kandy Kiss into an involuntary Chapter 7 bankruptcy filing.
In court papers, Kandy Kiss accuses several of its former employees, current Target employees and Betancur of stealing Kandy Kiss’s confidential information to divert business to Secret Charm.
The cross complaint also maintains that Betancur bribed several Target workers with lavish dinners and gifts to influence their decision to cancel orders for a range of products, which included the Mossimo and Merona labels and divert them to Secret Charm. “As a result of these bribes and illegal payments, which are in direct contravention of Target’s own stated code of conduct, including rules against conflicts of interest, the Target employees aided and abetted Betancur” and other Kandy Kiss employees in their wrongful conduct against Kandy Kiss, the cross complaint said.
“As a result of the bribery, Target ceased its longstanding relationship with Kandy Kiss and is now conducting business with Betancur at Secret Charm,” Kandy Kiss said in court documents, adding that the scheme was planned and carried out while Betancur was employed at Kandy Kiss.
In his capacity as head of sales and acquisitions, Kandy Kiss said that Betancur, while employed at Kandy Kiss, built and fostered a solid relationship with Target. He was the go-to guy for Kandy Kiss when dealing with Target for design, marketing, production and sales of apparel and accessories to different Target divisions, including Target Girls, Xhil, Mossimo and Merona.
The Van Nuys garment maker said that Betancur “began making unreasonable and extortionate demands to Kandy Kiss for payment, expressly threatening to ruin the relationship between Kandy Kiss and Target if Kandy Kiss did not acquiesce to his demands,” the company said in its court filings.
The cross complaint is in response to a lawsuit that Betancur filed in January 2016 maintaining he was owed thousands of dollars that were agreed upon in a settlement agreement drawn up on Jan. 1, 2014.
In his lawsuit, Betancur maintained that Kandy Kiss agreed to pay him end-of-the-month consulting fees through Dec. 31, 2015, and 1.5 percent of the gross amount of the merchandise shipped to Target in 2016. But Betancur said he did not receive those payments and was not even reimbursed for business expenses he incurred.
Betancur, who worked for Kandy Kiss from early 2001 to October 2015, said he did not “exploit any nonpublic assets, confidential information or trade secrets of Kandy Kiss in his subsequent business ventures.”
Kandy Kiss, founded in 1975, was a longtime apparel manufacturer that started out making juniorswear and childrenswear under the labels Zoey, YB Normal, YB Kids and Sammi & Me.
Over the years, it increasingly made private-label goods for retailers such as Kohl’s, JCPenney, Walmart and Forever 21.