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Restoration Hardware chief resigns after inquiry, report says

August 17, 2012|By Shan Li
  • Restoration Hardware's chief executive has stepped down.
Restoration Hardware's chief executive has stepped down. (David Zalubowski / Associated…)

The chairman and co-chief executive of upscale home decor chain Restoration Hardware has resigned amid an internal inquiry into his relationship with a 26-year-old female employee, a report says.

The resignation of Gary Friedman, 54, who has served as chairman and chief executive since 2001, comes at a delicate time for the Corte Madera company as it readies to go public.

The retailer has stayed mum about the reasons for Friedman's departure, but announced earlier this week that co-chief executive Carlos Alberini will take over.

Acting on a tip from an ex-boyfriend of the female employee, Restoration Hardware hired the law firm of Weil, Gotshal & Manges to conduct an investigation that ultimately determined Friedman engaged in an inappropriate relationship with the worker, who has since exited the company, according to the New York Times, which cited anonymous sources.

The board started the investigation almost immediately after the ex-boyfriend contacted them, but worried about how credible the allegations were because the man was airing his accusations widely and also had a criminal record, the report said.

But the female employee confirmed to internal investigators that she and Friedman had a "consensual and ongoing" relationship, the report said. Friedman, divorced for seven years, is still in a relationship with his former employee.

The company's board was worried about how such a relationship would affect the initial public offering and presented Friedman with the results of the inquiry this month.

The company did not return calls for comment. In a statement this week, Restoration Hardware announced a "reorganization" of the retailer, which includes the exit of Friedman to head a newly created apparel and accessories company, with a minority stake being held by his former company.

Friedman will assume the role of chairman emeritus and serve in an "exclusive advisory role" for Restoration with a "focus on strategy, creative and design direction." He also remains the largest individual shareholder.

People briefed on the matter told the New York Times that the board did not want Friedman as chief executive ahead of an initial public offering, but tried to keep ties with Friedman since he is personally involved with the brand and has been credited with driving the retailer's upscale aesthetic.

Two private equity firms, Catterton Partners and Tower Three Partners, control the company, which was taken private in 2008 for approximately $175 million, the report says. Now the company is updating its filings with the Securities and Exchange Commission, ready to go public once again.

The initial public offering may value Restoration Hardware up to $1 billion.

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