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Marciano Brothers' Time of Trial : Fashion: The four men who built Guess are a story of immigrant success. But their image has taken a severe beating amid a nasty war in the rag trade.

January 21, 1990|JIM SCHACHTER | TIMES STAFF WRITER

As boys growing up in the '50s, the Marciano brothers shared a cot in the kitchen of the Marseille synagogue where their father was the rabbi. Like stock characters in the movies of their youth, they were street urchins with hearts of gold--savvy, intensely close, in a rush to succeed, but always home Friday nights for Sabbath dinner.

Today, Georges, Maurice, Paul and Armand Marciano are huge successes, the founders and 50% owners of Guess, one of the garment industry's most phenomenal triumphs of the 1980s. Their hands-on management has turned $170,000 scraped together from the leavings of bad real estate deals into a fashion empire that last year sold $500 million in blue jeans, men's and women's casual wear, swimsuits, shoes, watches, eyeglasses and children's clothing.

The brothers still live within a few blocks of one another, only now in grand homes in Beverly Hills. The fruits of their commercial genius surround them: costly artwork, expensive cars, a new 14 1/2-acre headquarters in downtown Los Angeles, a growing chain of MGA retail stores soon to be renamed Guess, a "Marciano Pizza" at Spago.

And so inseparable are the Marcianos--the joke was the brothers never could marry, they were so tight--that when their parents are in town, they still share Sabbath dinner.

If not for one very bad decision, there the brothers' tale would rest, an only-in-America fable of immigrant achievement.

The error was that in July, 1983, barely 18 months after they founded Guess, the Marcianos--eager for the capital and business know-how that could help their already hot company explode--sold a half-interest in Guess to the Nakash brothers (Joe, Avi and Ralph), the Israeli-born owners of Jordache, a much bigger jeans maker.

Within six months, the partnership was foundering; within a year, the families were at total war.

The Nakashes say the Marcianos tried to provoke a break, having developed seller's remorse when they realized that the stake they had sold for just under $5 million was worth many times more. (Guess profits over the past four years have averaged about $45 million annually.) The Marcianos say the Nakashes tricked them into the sale, having intended all along to make off with Guess designs for Jordache, whose success was fading.

A jury in Los Angeles County Superior Court sided last year with the Marcianos, finding that the Nakashes had defrauded their partners from the start. In a trial scheduled to begin this week, another jury will determine what damages, if any, the Nakashes owe the Marcianos. Ultimately, the Marcianos hope, a judge will restore their 100% ownership of Guess.

Even if the Marcianos get everything that they want in court, though, their six-year dogfight with Jordache will have been won at great cost. And not just the $25 million or more that the Marcianos have paid in legal fees, or the $10 million that they have promised Los Angeles attorney Marshall B. Grossman if he forces the Nakashes out of Guess.

For in the course of this rag war, the Marcianos' silken image has frayed, as allegations about their conduct before and after starting Guess have come to light:

- Their own investigators, hired to prove that the Nakashes' agents planted false information about the Marcianos in French police files, concluded instead that the Marcianos were considered "commercial criminals" by French law enforcement.

French records obtained by the Marcianos say none of the brothers was ever convicted of a crime; the brothers say their private eyes were turned against them by Jordache's sleuths.

- A former Superior Court judge, named to the Guess board to break ties and investigate the Nakashes' charges of misconduct, found that the Marcianos had schemed repeatedly to divert Guess funds. The Marcianos, for instance, collected nearly $1 million in kickbacks from Guess contractors, the judge said.

The Marcianos have acknowledged that they wanted to draw more money from Guess than their agreement with the Nakashes allowed. But they insist that their conduct of the business was cleared with lawyers and accountants. The judge said the schemes did not demonstrate "bad faith or fraudulent intent."

- A congressional subcommittee declared in public hearings last summer that the Marcianos had exerted "improper influence" over the Los Angeles office of the Internal Revenue Service. The Marcianos deny any wrongdoing. Half a dozen federal agencies are said to have probed the actions of Octavio Pena, the Nakashes' chief investigator, who assisted the subcommittee.

- Most damaging, potentially, is that a federal grand jury in Los Angeles has been investigating alleged tax evasion by the Marcianos. The Marcianos' lawyers say it appears that the probe has been closed. Pena says the brothers may soon be charged. The prosecutor in the case won't comment.

So for the Marcianos--by turns charming and moody, generous and ruthless--the taste of success is bittersweet.

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