The Journal. - Sex-Trafficking Charges for Former Abercrombie CEO

Episode Date: October 24, 2024

Mike Jeffries, former CEO of Abercrombie & Fitch, was arrested and charged with running an international sex-trafficking ring. WSJ’s Khadeeja Safdar describes the alleged crimes and the potential fallout for the company. Further Reading: -Former Abercrombie CEO Mike Jeffries Is Arrested, Charged in Sex-Trafficking Case  Further Listening: -The Resurrection of Abercrombie & Fitch  -JPMorgan's $75 Million Jeffrey Epstein Settlement  Learn more about your ad choices. Visit megaphone.fm/adchoices

On Tuesday, the U.S. attorney for the Eastern District of New York stepped up to a podium. Good afternoon. I'm Breon Peace, the United States attorney for the Eastern District of New York. Peace was speaking just hours after the arrest of the former CEO of Abercrombie & Fitch, Mike Jeffries. Jeffries was charged with 16 counts of sex trafficking and interstate prostitution. But while Jeffries was the CEO of one of the most recognizable clothing retailers

in the world, he was using his power, his wealth, and his influence to traffic men for his own sexual pleasure. How serious are the allegations against Jeffries? Very serious allegations. He's been charged with essentially orchestrating a scheme to pressure victims to participate in sex events. And the indictment alleges that many of those victims were misled into believing that they would get jobs.

Khadijah Safdar is an enterprise reporter who's been investigating sex trafficking in the world of business. What's most surprising is how long it took to uncover this. Mike Jeffries had been CEO for many years. This is a consumer brand. People knew about this brand, they visited the stores, and yet this was happening behind the scenes. It's pretty shocking. The federal indictment against Jeffries alleges that his sex trafficking ring began in 2008

and continued operating for at least seven years. It includes 15 victims, but the U.S. attorney said the number is likely much higher. The indictment also says that Jeffries used his power as the CEO of Abercrombie to run the trafficking ring. A lawyer for Jeffries said that his client would respond to the allegations in court. And an Abercrombie spokesperson said the company is, quote, appalled and disgusted by Jeffries' alleged behavior. Can the company separate itself from these allegations? I mean, I think that's the big question because it's not like

there's a rogue employee, like a low-level employee, that went out on his own and did some things. This is like the CEO. Welcome to The Journal, our show about money, business and power. I'm Kate Leimbach. It's Thursday, October 24th. Coming up on the show, the sex trafficking allegations against the former CEO of Abercrombie & Fitch. Thanks for watching. See you next time. Bye-bye. Bye-bye. Bye-bye.

Bye-bye. Bye-bye. Bye-bye. Bye-bye. Bye-bye. Bye-bye. Bye-bye. Bye-bye.

Bye-bye. Bye-bye. Bye-bye. Bye-bye. Bye-bye. Bye-bye. Bye-bye. Bye-bye.

Bye-bye. Bye-bye. Bye-bye. Bye-bye. Bye-bye. Bye-bye. Bye-bye. Bye-bye. cutting-edge trading, clearing, and investment solutions, and products in multiple asset classes, including equities, derivatives, and effects. Learn more about the exchange for the world stage at SIBO.com. Your group photos are likely missing someone important. You! With AdMe on the new Google Pixel 9 Pro, never rely on a stranger again. Add yourself to any group photo through the magic of AI. Get yours with TELUS at TELUS.com slash Pixel 9 Pro, never rely on a stranger again. Add yourself to any group photo through the magic of AI.

Get yours with TELUS at TELUS.com slash Pixel 9 Pro. At malls around America in the late 90s and early 2000s, Abercrombie was king. It sold shirts emblazoned with the company's name. And if you bought one, you'd get one of Abber Crombie's iconic bags with a black and white photo of a shirtless male model. I actually remember when I was in middle school, people in my school really wanted to work at Abber Crombie.

They were trying to get the jobs and they would be called floor models. And a lot of the way that you would get hired would be based on the way you look. And that was really considered cool at the time amongst teens. Did you ever work there? I did not work there, but I just remember that it was almost considered like a status symbol to be working there. Which is, you know, unique because usually retail jobs aren't really considered a status symbol to be working there, which is unique because usually retail jobs aren't really considered a status symbol, but it was like the cool place to work.

One man was credited with making Abercrombie cool, Mike Jeffries. But before he took the helm in 1992, the company was not considered cool. It was at that time a money losing brand. And Mike Jeffries completely revamped what Abercrombie was about. He created a lookbook and the marketing was very hypersexualized. He hired a lot of college students to staff them.

They had those shirtless male greeters at the doors. The T-shirts and sweatshirts had Abercrombie logos all over them. And this revamp actually made sales go up. Under Jeffries, sales went from $100 million to more than $4 billion. But over time, his strategies began to fall flat. And in 2014, he stepped down as CEO. For about a decade after that, we didn't hear much about Jeffries. Until last year.

How were Jeffries alleged crimes discovered? So they were discovered by a BBC investigation. A reporter started digging into them. She got connected with one of the victims and he shared his story and then through that she learned of other victims and she interviewed them. Several of the men ended up talking on the record. I think he's a deviant. I think he's a predator. I don't think that's what the public has seen. I was overwhelmed like I mean I've never seen anything like this. The BBC investigation brought pressure on Abercrombie.

And last fall, one of the victims filed a civil lawsuit seeking class action status. Federal investigators started looking into potential criminal activity by Jeffries during and after his time as CEO. That led to his indictment earlier this week. The indictment alleges that Mike Jeffries used a network of employees and contractors to run a sex trafficking ring, and he kept this a secret.

According to the indictment, the victims were recruited into the trafficking ring by a man named James Jacobson, who was also arrested this week. Jacobson allegedly led them to believe that they were being considered for modeling jobs. There was a whole operation that was involved with the recruiting where they would actually interview the men for hiring. So they thought they were going through a real hiring process. And the indictment alleges that Jacobson, he would hold tryouts for the recruits, and sometimes he would require them to first have sex with him. An attorney for Jacobson declined to comment.

The indictment alleges that after being recruited, victims traveled to events hosted by Jeffries and his partner. The events were held at his residences in New York, as well as at luxury hotels in places like Italy, France, and Morocco. According to the indictment, some of these men believed that attending these events would be the next step in getting a job. They weren't told ahead of time that they were going to be attending a sex event and that they had to put away their phone, and that they would have to sign an NDA non-disclosure agreements.

In the civil suit, it describes that the people that were there, the staff, they actually had Abercrombie shirts on, and they were led to believe that these events were like company-sponsored events, where they were trying out for legitimate jobs. And then to top that off, they were given muscle relaxants, which are known as poppers, in some cases Viagra.

And so they were coerced into sex acts. According to the indictment, Jeffries was present at these events and was either watching or participating. The victims say that at the end of the parties, they were handed envelopes with thousands of dollars in cash. Federal prosecutors said that Jeffries employed security staff to surveil and intimidate witnesses,

and they used burner phones to communicate. So there was a scheme to prevent this also from coming out because they were trying to intimidate people into not sharing this publicly and not disclosing what was happening behind the scenes. The U.S. attorney alleged that Jeffries had a secret staff to run the events, ultimately spending millions of dollars

on the trafficking ring. So the indictment and the civil suit alleged that he was allegedly using his power as CEO to lure these men and then compel them into sexual activity. They were essentially misled under the pretense that this was a company thing. A spokesperson for Abercrombie said that the company

is committed to cooperating with law enforcement and has quote, zero tolerance for abuse, harassment or discrimination of any kind. And while the federal indictment doesn't include Abercrombie, this case is bringing heightened scrutiny to the company. That's next. Your group photos are likely missing someone important. You. With AdMe on the new Google Pixel 9 Pro, never rely on a stranger again. Add yourself to any group photo through the magic of AI. Get yours with Telus at telus.com slash Pixel 9 Pro.

During Mike Jeffries' tenure as CEO, Abercrombie faced scrutiny related to its branding and hiring. The company marketed itself with pictures of buff young white men, and it staffed its stores to match this look. These practices led to lawsuits. People were alleging that they weren't hired for jobs because of discriminatory practices, because it turns out if you're hiring people based on the way they look, that that could be against the law or it could be problematic.

And so people filed suits for discrimination, age discrimination. There was a string of lawsuits. In 2004, Abercrombie agreed to pay $40 million to settle a class action suit that said the company had discriminated against Black, Latino, and Asian job applicants and employees. The company agreed to implement diversity programs, but didn't admit wrongdoing. A few years later, Abercrombie settled a lawsuit over age discrimination. The plaintiff, who was 55, claimed he was fired because he didn't fit the company's, quote, youthful, all-American image. The civil case, the one filed by some victims last year,

is moving forward. It accuses not only Jeffries, but also Abercrombie itself of playing a role in enabling the sex trafficking. The company has said it hired a law firm to conduct an independent investigation. I think we'll learn more of that when the civil case proceeds because they're suing the retailer, so we'll find out. But it's pretty clear that this wasn't a random rogue employee. This was the CEO of the company that's being accused of doing this. And these men thought that they were getting jobs at Abercrombie. And there was like details in the civil suit that show that the company name was

being used or invoked to lure them there. And I think the company may end up alleging that these weren't actually company-sponsored events, but this was the CEO that was involved that's being accused. So I think there'll be questions around whether there was complaints ever made to the board of directors. There's a big corporate governance question here. Right, what was known inside the company at the time?

Did people speak up to HR? I think that is going to be one of the questions that the lawyers are going to ask in the course of the civil litigation is finding out whether any complaints were made, whether complaints were taken seriously. What does all of this say about how hard it can be for victims to speak out? When the person that they're accusing is the CEO, it's just like the power imbalance is just so large. I've spoken to many victims over the years of these kinds of offenses. And there's like a million thoughts that run through people's heads, you know, about the consequences.

Sometimes they fear for their safety, but also like the career consequences, not being able to get a job somewhere else because they went up against somebody who was so powerful in the industry where they want to work. -♪ in the industry where they want to work. Do you think that Abercrombie's hypersexualized marketing helped enable or mask these alleged crimes? Yeah, I think that it was like hypersexualized marketing,

judging young men based on their appearance. There was a lot of just cultural aspects that had become normalized. And that at the time actually were considered cool. And people weren't really looking at them the same way that we look at them now. Like after Me Too, looking back, the nature of a lot of the reader comments that I'm getting is that, you know, that was creepy. Like, that was something that shouldn't have been normalized and made to be considered cool. How might this impact Abercrombie and Fitch? In the civil suit against the company,

we would have to see what the outcome for that is, but naturally, this is, is like not good press. And there's a lot of questions that now the public has about the company and who at the company knew and how long this has been going on for. ["Sex Trafficking"] If you think you or someone you know could be a victim of sex trafficking, you can call the National Trafficking Hotline.

It's 1-888-373-7888. That's all for today, Thursday, October 24th. The Journal is a co-production of Spotify and The Wall Street Journal. Additional reporting in this episode by James Finnelli. Thanks for listening. See you tomorrow.