Rigged Hearing Claimed in Tug-of-War Over Lucrative Jeans Maker : Fight for Control of Guess Moves to Congress

The bitter fight between two bands of brothers for control of Guess Inc., a fabulously profitable jeans manufacturer, has moved to Washington and prompted accusations of a rigged congressional hearing.

A House subcommittee investigating corruption in the Internal Revenue Service plans hearings later this month at which it will explore the ties between the four Marciano brothers, who founded Guess, and high-ranking IRS officials in California.

The Marcianos’ lawyers say Congress is being manipulated by the Marcianos’ archfoes, the Nakash brothers, who own rival jeans maker Jordache and half of Guess and are fighting to take control of the other half.

Fairness Questioned

Congress has fallen for a “campaign of disinformation and dirty tricks,” says a “white paper” written by the Marcianos’ influential lawyer, former Rep. James R. Jones (D-Okla.).

Jones’ report is designed to raise questions about the fairness of the congressional inquiry even before the Government Operations subcommittee on consumer and monetary affairs calls its first witness. The report says the Nakashes “have tried to manipulate federal agencies and the media in an attempt to discredit their victims, the Marcianos, and undermine the federal investigation of their own conduct.”

A subcommittee spokesman on Friday said Jones’ report was “hysterical.”

“As in all investigations, the subcommittee reaches conclusions based on the careful examination of all relevant documents and extensive interviews with all knowledgeable witnesses,” the spokesman said. “Private disputes and hysterical charges and countercharges between private parties are of no interest and no relevancy to our investigation.”

“Evidence concerning the legality and propriety of relationships between present and former IRS officials in Los Angeles and the Marcianos, and the adequacy of the IRS’ internal investigation of those relationships, will be presented to the subcommittee,” the spokesman said.

For almost a year, subcommittee investigators have checked allegations that the Marciano brothers unfairly influenced IRS officials in California to arrange for a tax evasion probe of Jordache. The subcommittee is also investigating alleged misconduct by IRS officials in other parts of the country, including Chicago.

The Marcianos and Nakashes, immigrant families who became multimillionaires through their successes in the highly competitive jeans business, have been feuding furiously for years.

In 1983, the Marcianos sold half of their company, which has the logo “Guess?,” to the Nakash brothers for $5 million.

The Nakash family firm, Jordache, was a big established manufacturer of standard jeans with access to capital and factories, while Guess was a successful newcomer making high-fashion stone-washed jeans.

Things quickly turned bitter between the Marciano family--Georges, Paul, Maurice and Armand--and the Nakash family: Ralph, Avi and Joe.

Charges Fly

The Marcianos claimed that the Nakashes were stealing Guess designs and selling them under a Jordache label. The Nakashes accused the Marcianos of siphoning off large amounts of money without permission.

The Marcianos sued to cancel the 1983 sale. They won an important legal victory in March when a Los Angeles County Superior Court jury endorsed their claims that the Nakashes bought into Guess intending to steal its designs. However, the case awaits a second trial to determine damages.

The Marcianos and Nakashes, fighting with squadrons of lawyers and investigators, have been denouncing each other as commercial thieves and tax cheats. Grand jury investigations of both companies are under way for possible tax fraud.

The Marciano camp fired the latest salvo with its 26-page report titled “Jordache, the Nakashes and Octavio Pena: A story of Misuse of Government and the Media for Personal Gain.” It says Pena, president of Lynch International, a security consulting firm hired by the Nakashes, “engaged in a campaign of misinformation and dirty tricks.”

Pena is accused in the report of using the IRS, the Immigration and Naturalization Service and the media to attack the Marcianos and says Pena was promised a $1-million bonus if the U.S. attorney in New York drops its investigation of Jordache. Pena had “a million reasons for motivation” to “destroy the Marcianos’ reputations,” the report said.

Pena responded Friday, saying: “Everything I have done is by the book and strictly honest.

“The truth is, I have been able to find people who confirmed to me that the Marcianos committed crimes,” he said. “Now, they (the Marcianos) are trying to divert attention from the facts that they were involved in major crimes.”