Rags brought riches to Guess co-founder Georges Marciano, but now he faces ruin

The buses that ferry tourists past the homes of celebrities used to slow to a roll outside a Beverly Hills mansion with 11 Ferraris parked just inside the gates. Georges Marciano lives here, the gawking customers were told. You know, Guess Jeans.

A knowledgeable guide might have gone on to describe Marciano as a classic American success story -- a poor immigrant who amassed a fortune through hard work and business savvy. The guide might have noted Marciano's two other palatial residences on Sunset Boulevard, his Boeing 737, the art collection boasting works by Marc Chagall and Ed Ruscha, the cellar of priceless wines, the homes in Utah and France, and his self-financed if little-noticed campaign for governor.

These days, there is no reason for the buses to stop. The Ferraris are gone. Creditors have laid claim to Marciano's assets. The gubernatorial campaign is dormant, and the great man himself has disappeared.

"I do not know where Mr. Marciano is residing at this time," his spokeswoman conceded recently.

Marciano, 62, cannot blame his troubles on a Ponzi scheme or the mortgage meltdown. He is poised to lose an empire worth as much as $500 million because he is convinced that some employees stole from him.

That his own accountants and law enforcement agencies found not a cent missing has not dissuaded Marciano from persisting in what he calls "a crusade" to prove the allegations. It has been thus far a losing battle.

Lawsuits that Marciano initiated to recover assets backfired when a judge instead ordered him to pay the accused employees hundreds of millions of dollars in damages. Marciano, the design prodigy credited with introducing the world to acid-washed denim and jeans as high fashion, was portrayed during the proceedings as a man unhinged from reality. Reeling from an acrimonious and bitter divorce, he binged on pain medication, pursued women barely out of their teens and, ultimately, made paranoid accusations about those closest to him, according to allegations in court papers, transcripts of testimony and reports by a sheriff's investigator

A self-made man has become, in the eyes of many, a self-destroyed man.

"I do believe it's tragic," said R. Rex Parris, an attorney who represented some of the employees who won libel judgments totaling $425 million against Marciano last summer. "He surrounded himself by people who wouldn't tell him that he was being a jerk, and as sufficient time went by, he started to become disconnected from the world."

Marciano's attorney, who wrote in a recent court filing that his client is living somewhere outside the U.S., disputed the tawdry accusations aired in court. He said sanctions that the judge imposed on Marciano for flouting her orders barred him from presenting his side of the story to the jury.

"Mr. Marciano's forced silence cannot be viewed as an admission of those false allegations, which he denies," Daniel J. McCarthy said in a statement.

Marciano and his three brothers started Guess Inc. in Los Angeles in 1981 after arriving from France, where they had grown up in poverty. Georges dropped out of school at 15 and quickly gravitated toward the garment industry. His design of skintight jeans, zippered at the cuffs and softened by repeated washings with pumice stone, launched the brand. The Los Angeles County Museum of Art named him California's Designer of the Year in 1987. Even after he left the company in 1993, labels and advertisements touted "Guess? by Georges Marciano."

After selling his stake in Guess for $220 million, Marciano turned his attention to real estate. The crown jewel of his properties was the Bank of America building in Beverly Hills, nicknamed the Power Tower for its influential and wealthy tenants. Marciano shared a 20,000-square-foot mansion on Crescent Drive with his wife, Megan, whom he married in 1986, and their four children. The family enjoyed what Megan Marciano would later describe in divorce papers as a "standard of living that had no limits."

"We have dinners cooked by a private chef . . . and watch first-run movies shown by a professional projectionist in the full screening room of the basement of our home," she wrote in a filing in the divorce case. "Money has never been an object."

Marciano, who never lost his designer's eye, assembled a collection of striking objects that would eventually include antique firearms, millions in gold coins, the Ferraris, a $16-million, 84-carat diamond he named for his daughter, Chloe, and enough art to open a small museum.

"He had some of the most beautiful Rockwells I'd ever seen in my life. He loved patriotic art," said Kevin Lipton, a Beverly Hills coin dealer who counted Marciano among his customers. "There are a lot of rich people in this town who have no taste, but this guy had amazing taste."

Marciano was generous, both to employees and selected charities. The trade-off was his volatile personality, according to employees' testimony. The odor of an employee's lunch or creases in a $100 bill could transform his Gallic charm into anger, they said.

"You were always very afraid of the mood that he might be in because it changed in the blink of an eye," a former employee, Steve Chapnick, testified in the libel case.

That increased after the Marcianos' marriage crumbled, employees recalled in court. In divorce proceedings that began in 2002, Marciano and his wife traded bitter charges over fidelity and money. She acknowledged a relationship with her personal trainer but insisted that it began after the marriage ended. He admitted placing a tracking device on her car. The fight became so nasty that the judge barred both Marcianos from speaking to their children about any aspect of the divorce. In 2004 they reached a confidential settlement.

The divorce left Marciano a changed man, according to testimony in the defamation case. He began liquidating assets, including the prize of his business portfolio, the Power Tower, which sold in 2005 for about $135 million.

"He was very depressed," recalled Miriam Choi, a bookkeeper who had worked for Marciano for 17 years. "His mood became very erratic, very intensified, let's say, in the way he dealt with people."

He was taking large doses of painkillers that he obtained in the names of other people, according to Choi's testimony and statements to a Los Angeles County Sheriff's Department investigator. One employee told the investigator that Marciano spent as much as $3,000 a week on drugs that left him confused.

According to testimony and sheriff's reports, Marciano installed spyware on his home and office computers and monitored his employees' comings and goings with security cameras over their workstations. In one incident recounted to an investigator, Marciano accused people of stealing chocolate croissants from his penthouse office.

Then there were the au pairs. Marciano told his staff that he wanted to hire a live-in baby sitter -- young, attractive and foreign -- even though his children ranged in age from 11 to 18 and lived with his former wife. He had employees comb through profiles on an au pair website, and in 2005 between 50 and 60 women were flown to Los Angeles for interviews, according to staffers' testimony and statements to the investigator. The women were picked up at the airport in limousines, put up at five-star hotels, wined and dined at Spago, taken on shopping sprees and slipped $100 bills, the employees said. But none were hired.

"He looked at it as a dating service," testified Gary Iskowitz, his accountant of more than two decades. Marciano told an employee he "was now a single man and he had manly needs."

Whatever diversion the au pair visits offered, Marciano soon was consumed with another matter. Reviewing his financial records in January 2006, he fixated on $1.4 million in cash withdrawn from his accounts the previous year. Maintaining that he could not have burned through that much cash in 12 months, he demanded an accounting from Choi, the head bookkeeper. She testified that she had handed him paperwork showing he had spent the money -- much of it on the au pairs.

Marciano responded by accusing her of theft. "You're going to jail," Choi recalled him telling her.

According to testimony and Sheriff's Department reports, Marciano next concluded that Choi's two assistants were in on the embezzlement. When Iskowitz, his accountant and friend, examined the records and told him that no money was missing, Marciano accused the accountant and his partner of being part of the scheme. After Chapnick, his onetime property manager, agreed to fill in for his depleted office staff, Marciano decided he also was part of the conspiracy.

Some employees resigned, others were fired, but Marciano, over two years, periodically sent them floods of accusatory e-mails and letters, with copies to colleagues and government officials. Several employees testified that Marciano had them and members of their families followed.

"I was so terrified that he's going to ruin my life and my family," recalled bookkeeping assistant Camille Abat.

Marciano also hired outside accountants -- five firms by one count -- to perform forensic audits of his books and turned to law enforcement.

At the Sheriff's Department, the assignment went to Det. Alex Gilinets, who testified that a supervisor told him Marciano was a "good friend" of Sheriff Lee Baca and the embezzlement investigation was a priority. (A spokesman for Baca said Marciano had donated $100,000 to charities affiliated with the sheriff in 2007 and the men were "slight acquaintances." He said the sheriff did not know of the probe until it was underway.)

Gilinets said he spent 400 to 500 hours looking into the allegations. He subpoenaed bank records, questioned independent accountants and met again and again with Marciano for conversations he described as increasingly unsettling.

"I got the impression that he would see something in a movie and would come up with the idea of how . . . this is happening to him," Gilinets recalled.

The crimes Marciano alleged became larger and more complex with the passage of time, the detective testified. Eventually, according to trial testimony, Marciano insisted that $413 million in cash and goods was missing. Gilinets saw no evidence of embezzlement, nor did independent forensic accountants Marciano had hired. The detective, a former narcotics officer, suspected that Marciano was abusing prescription drugs and suffering delusions. He recommended that Marciano speak "with a doctor or a professional," he testified.

After reviewing Gilinets' report, the district attorney's office declined to prosecute the employees. The FBI, Internal Revenue Service, U.S. attorney's office and Beverly Hills police also rejected Marciano's pleas to go after the employees.

Frustrated, Maricano turned first to politics. His campaign for governor as an independent was born of frustration that authorities weren't acting on his allegations, said his former campaign manager, Rod Harrell.

Marciano initially approached the race like other candidates, staking out positions on education and the environment and setting up a website, Harrell said.

But soon, he said, "every interview started going more and more toward 'Look what they are doing to me in this case.' "

Marciano sued seven former employees seeking return of the millions he alleged were missing. He went through law firm after law firm -- 17, by the judge's count -- and spent $12 million in legal and accounting fees, all to disastrous effect.

The employees countersued for libel and intentional infliction of emotional distress. Then Los Angeles County Superior Court Judge Elizabeth White ruled that Maricano had refused to follow court orders concerning pretrial proceedings, threw out his case and barred him from presenting a defense against the countersuits. As a result, the only question before the judge and jury at trials in July and August was how much financial compensation the employees deserved.

Marciano, whose attorneys were not allowed to cross-examine witnesses, address the jury or give evidence, testified briefly. He said he didn't actually need the purportedly stolen millions.

"It's about justice," he said. "It's a crusade, sir."

Witnesses described Marciano as dangerous and unstable. A security expert said the former employees needed 24/7 protection for the foreseeable future. The testimony prompted a juror to send a note to the judge asking whether the jury was at risk.

The workers testified that the allegations had taken a terrible toll on their mental and physical health and hurt their marriages and families.

The jury awarded five former employees $74 million each in July. The judge added $55 million in damages to Iskowitz, his wife and business partner the following month, for a total of $425 million.

The judge later reduced the award to $260 million, in line with the amounts employees originally sought.

"It's not a lot of money compared with what he did to us," Iskowitz said in an interview. "I don't feel sorry for him at all."

After the verdicts, the employees moved to seize Marciano's assets. An accountant working for Marciano placed their value at $175 million in August. Harrell put the figure at $450 million to $500 million.

Harrell, who resigned from Maricano's staff in late August, added that Marciano did not fear losing his fortune. "There was a conversation . . . where he assured me that he would be fine. . . . I imagine it is not in the U.S.," Harrell said, referring to Marciano's fortune.

Soon, Harrell said, the Ferraris quietly disappeared, and a few weeks later, he spotted movers carrying off a vault identical to ones Marciano had used to store paintings, the diamond named after his daughter and other valuables.

Marciano declined repeated requests for an interview, but sent an e-mail saying he welcomed coverage of his case and wanted a reporter to review a 50-page packet that included clippings about crooked government officials and letters to a former attorney bemoaning developments in court. In a statement issued through a spokeswoman, he vowed to appeal the case vigorously.

"I will fight this case to the Supreme Court if necessary because the constitutional protections that we all rely on have been denied," the statement said.

It was silent about his whereabouts, but Marciano gave an interview to a business magazine in Montreal, where local officials say property records indicate he has bought and sold millions of dollars of property in recent years.

"He's basically exiled," Harrell said. "It's very sad to me to see someone's American dream, which they accomplished, die."

harriet.ryan@latimes.com

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