A Purchase business that owns part of the Baby Phat fashion brands is suing another co-owner for $10 million for allegedly stealing funds.
Loconte Family LLC accused Keyway Pride Limited, of Sacramento, California, of fraud, in a July 7 complaint filed in Westchester Supreme Court.
Loconte contends that Tim Leissner, an admitted fraudster and the estranged husband of Baby Phat Holding Co. CEO Kimora Lee Simmons, somehow got his hands on Baby Phat funds.
Loconte “is perplexed how Keyway allowed Leissner … to simply convert $5 million of cash without Keyway’s knowledge,” the complaint states.
Attempts to find contact information for Simmons and Keyway, to ask for their side of the story, were unsuccessful.
Simmons – a model, TV personality, designer and businesswoman — founded Baby Phat in 1999 as an offshoot of the Phat Farm clothing brand established by her former husband, Russell Simmons (perhaps better known for creating the hip-hop recording label Def Jam Recordings).
In 2012, Loconte Family LLC, headed by Anthony LoConte, bought Phat Farm Holding Co., the owner of the Phat Farm and Baby Phat brands. Loconte and Phat Farm are based at the RiverView Purchase building.
In 2017, in a deal proposed by Tim Leissner, a former Goldman Sachs managing director who had married Simmons, Keyway bought a 70% interest in the Baby Phat part of Phat Farm.
Simmons was appointed CEO, president, treasurer and secretary.
The complaint does not disclose the purchase price, but it says Keyway also agreed to contribute $5 million in capital.
Months after the new deal was struck, Leissner was indicted on charges of violating the Foreign Corrupt Practices Act and money laundering in connection to the theft of billions of dollars from the Malaysian sovereign wealth fund. In 2018, he pleaded guilty to personally stealing $200 million and to paying bribes to foreign officials. He is scheduled for sentencing in February in Brooklyn federal court.
Last year, Loconte sold Phat Farm Holdings to Baby Phat Holding Co., essentially giving Simmons majority control of the entire Phat fashion line that she and her ex-husband, Russell Simmons, had founded.
All Baby Phat cash flow would go to Loconte until the purchase price, undisclosed in the complaint, was satisfied, and Baby Phat would make monthly payments on a bank loan that Loconte had received.
Keyway provided reports and assurances that all was well financially, the $5 million capital contribution was secure, and Baby Phat was on track to achieve greater success, according to the complaint.
But in March, Loconte was told that the $5 million capital contribution was missing and Baby Phat did not have the funds to cover the bank loan payments.
Recently, Keyway allegedly claimed that Leissner, acting alone, had loaned the $5 million to third parties.
“Even assuming Leissner did solely steal this money,” the complaint states, Simmons “should have noticed $5 million in cash was suddenly missing and should have taken immediate action to correct this wrong.”
The complaint does not name Simmons or Leissner as defendants. It accuses Keyway of fraud, breach of fiduciary duty, and conversion, and is demanding $10 million.
Loconte is represented by Manhattan attorneys James T. Kim and Arnold P. Picinich.
