UPDATE, SIGNET RESPONDS; Report: Signet Jewelers’ Two Largest Retailers Accused Of Widespread Sexual Harassment, Discrimination

Bombshell may be the proper word to describe Monday’s story in The Washington Post regarding Kay Jewelers and Jared The Galleria of Jewelry. Devastating may be the proper adjective. 

Since 2008 there’s been an ongoing arbitration case between Sterling Jewelers (which is the parent division of Kay and Jared), by former female employees of the company who allege they were victims of sexual harassment and discrimination, dating back to the 1990s. It began with about a dozen former employees. It has now grown to approximately 69,000 men and women employed at the two jewelry chains, according to the Post.

Update: Signet Jewelers (the parent company of Sterling Jewelers) just issued a response to what it terms “distorted and inaccurate media reports.”

It reads in part, “It's critical to understand that an arbitration claim was brought against Sterling in 2008 that alleged gender discrimination in pay and promotion. None of the 69,000 class members have brought legal claims in this arbitration for sexual harassment or sexual impropriety. Since its filing, it has never included legal claims of sexual harassment or hostile work environment discrimination. The only claims certified to proceed on a class wide basis relate to alleged gender pay and promotions discrimination. Despite years of litigation, millions of pages of documentation and numerous depositions, claimants' counsel have chosen not to file sexual harassment claims. These allegations publicized by claimants' counsel and reported in the media create a distorted, negative image of the company.” 

The full statement is at the end of the story

Over the years I remember this case appearing in public every so often and then disappearing again. Under arbitration rules, there is little transparency. So knowing the extent of what is being alleged was difficult to determine. 

Now we know and it isn’t pretty. 

More than 1,300 pages of sworn statements were released Sunday due to requests from the Post and lawyers representing the employees. Names of the executives being accused were redacted under the agreement to release the documents. However, through memorandums one of the executives was identified: Mark Light, now CEO of Sterling’s parent company, Signet Jewelers. He is among those accused of “having sex with female employees and promoting women based upon how they responded to sexual demands,” the Post reports. 

Most damning is this: “Multiple witnesses told attorneys that they saw Light ‘being entertained’ as he watched and joined nude and partially undressed female employees in a swimming pool,” according to the 2013 memorandum.”

About 250 women and men who worked at Sterling “allege that female employees at the company throughout the late 1990s and 2000s were routinely groped, demeaned and urged to sexually cater to their bosses to stay employed,” according to the Post. “Sterling disputes the allegations.” 

The others accuse the company of discriminatory practices in regards to pay and promotion. 

Many of the most striking allegations, according to the Post, stem from the company’s annual managers meetings, “which former employees described as a boozy, no-spouses-allowed ‘sex-fest’ where attendance was mandatory and women were aggressively pursued, grabbed and harassed.”

The Post backs the testimony with interviews of a few of the accusers. 

Signet Jewelers, as previously mentioned, is the parent company of Sterling Jewelers, which consists of Kay, Jared (two chains in this legal battle) and regional jewelry store chains. Signet is one of the two largest jewelry retailers in the world (depending on how it’s determined). It has operations in the U.S., Canada, Puerto Rico and the U.K. In 2014, Signet acquired Zales Jewelers. 

Signet’s sales were approximately $6.5 billion, according to its fiscal 2016 financial report. Kay and Jared make up about 58 percent of total sales. 

This is not only a public relations nightmare but it also has potential to have a devastating effect on Signet's balance sheet. Company sales have already struggled this year.

Signet scheduled its fiscal 2017 and fourth earnings release and conference call for March 9. This should be some presentation. 

In case you haven’t clicked on the link yet here it is again. 

Signet's statement:

Sterling Jewelers Statement on Ongoing Arbitration
Misleading media reports mischaracterize arbitration

Akron, Ohio, Feb. 28 - In response to the distorted and inaccurate media reports, Sterling Jewelers released the following statement:

It's critical to understand that an arbitration claim was brought against Sterling in 2008 that alleged gender discrimination in pay and promotion. None of the 69,000 class members have brought legal claims in this arbitration for sexual harassment or sexual impropriety. Since its filing, it has never included legal claims of sexual harassment or hostile work environment discrimination. The only claims certified to proceed on a class wide basis relate to alleged gender pay and promotions discrimination. Despite years of litigation, millions of pages of documentation and numerous depositions, claimants' counsel have chosen not to file sexual harassment claims. These allegations publicized by claimants' counsel and reported in the media create a distorted, negative image of the company.

Indeed, the distorted and inaccurate picture of our company presented in these allegations does not represent who we are. They involve a very small number of individuals in a workforce of more than 84,000 during the class period, and many allegations go back decades. The company takes any concerns seriously and had - and continues to have - multiple processes in place to receive and investigate allegations of misconduct. We continue to encourage all employees to use these processes to raise any workplace concerns so we can investigate and take appropriate action.

Regarding the alleged gender discrimination in pay and promotion allegations, our company is guided by our core values of fairness, opportunity, integrity and respect and has created strong career opportunities for many thousands of women working at our stores nationwide. As a result of our employment and advancement programs, as well as our culture, more than 68 percent of all our store management staff are female, and female participation in management positions continues to grow.

Because of our long-term commitment to equal opportunity, we have taken the allegations of pay and promotions discrimination raised in this case very seriously. We have thoroughly investigated the allegations and have concluded they are not substantiated by the facts and certainly do not reflect our culture.

Source: Signet Jewelers

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A ‘Shocked’ and ‘Disappointed’ Tiffany & Co. Ordered to Pay $450 Million to Swatch Group

A long, simmering dispute between two powerhouses in the luxury jewelry and watch world appears to have come to an end when a Dutch arbitration panel ordered Tiffany & Co. to pay 402 million Swiss francs ($450 million) to Swatch Group for breach of contract. In addition, a counter-claim by Tiffany & Co. was dismissed by the panel.

The dispute, which has been ongoing since 2011, was argued before the Netherlands Arbitration Institute, which provides a confidential way of resolving such disagreements. The result of the arbitration in Swatch’s favor was announced in a very brief statement by the watch company Sunday followed by a much longer statement filed with the Securities & Exchange Commission Monday morning by Tiffany. 

Tiffany cut its forecast for the year based on the ruling and it says it will continue to seek legal remedies.

“We were shocked and extremely disappointed with the decision of the majority of the arbitral panel,” said Michael J. Kowalski, Tiffany chairman and CEO, in the SEC statement. “We firmly believe the panel’s ruling is not supported by the facts of this case or the various agreements between the Swatch parties and the Tiffany parties. While we are reviewing our options with our legal counsel, I want to assure you that we do have sufficient financial resources to pay the full amount. We will record a charge for the after-tax impact of the award, which we estimate to be approximately $295 - 305 million, in the fourth quarter.”

In 2007, the two companies announced that they signed an agreement to produce and market watches under the Tiffany & Co. brand name. In September 2011, Swatch Group had terminated the collaboration for what it termed as a breach of contract and pressed claims for damages in December 2011 against Tiffany. In March 2012, Tiffany filed a counterclaim with the court of arbitration in charge.

The original agreement between the two parties was that Swatch Group—which produces, markets and sells watches under approximately 20 brands from the popular low-cost Swatch watch to the prestige and luxury brand, Breguet—was to design and produce watches under the Tiffany brand name. Those watches were to be sold through Tiffany stores around the world. Tiffany apparently didn’t think the watches created by Swatch fit their brand image. Swatch charged that Tiffany did little to market and sell those watches.

Tiffany noted in its statement that one of the three members of the arbitration panel issued a dissenting opinion and that the amount awarded reflects approximately 8.8 percent of the damages claimed by Swatch.

Tiffany, according to its statement, was also ordered to pay two-thirds of the cost of arbitration (approximately $800,000) and two-thirds of the cost of legal fees ($8.8 million).

 “We do not believe that the award will impact our ability to realize our existing business plans in the short or long term, and we are extremely pleased to be moving forward with our plans to design, produce, market and distribute our own Tiffany & Co. brand watches,” Kowalski said.

Kowalski said the payments will be made from cash on hand and funds available under its existing debt facilities. The company said that the charges associated with the award will reduce earnings per diluted share for the fiscal year ended January 31, 2014, to $2.30 - $2.35 from the guidance of $3.65 - $3.75, issued a month earlier.

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