Its name evokes a world of beauty and glamour. But lately, Elite Model Management, the largest modeling network in the world, has developed a bad case of the uglies. Not long ago it was a hot agency, representing such models as Cindy Crawford, Linda Evangelista, and Naomi Campbell. It still has Lauren Bush, President George W. Bush’s niece, and former supermodel Paulina Porizkova on its 750-strong roster.
For two years, Elite has been at the center of a $50 million class action. The lawsuit, originally filed on behalf of some 10,000 models against Elite and 12 other agencies, went to trial on June 1. The models allege rampant, decades-long price-fixing. BusinessWeek has learned that most of the agencies named in the suit, including Ford Models and Wilhelmina Models opted to settle the first day of the trial. The terms were not disclosed and the judge still must rule on the settlements.
The suit was just part of Elite’s legal woes. In a separate case last year, a jury awarded $5.2 million to Victoria Gallegos, a former executive trainee who sued Elite over a hostile work environment — they smoked, she had asthma — and wrongful termination. Elite is appealing. Largely because of that judgment, Elite Model Management New York filed for bankruptcy in February. Its assets, including Elite Los Angeles, Elite Miami, and other North American subsidiaries, are now for sale. Elite Model Management, the New York agency’s parent in Fribourg, Switzerland, is not in bankruptcy. According to class-action court papers, models could still go after the assets of Elite founder John Casablancas, who cashed out for millions in 1999, as well as assets they claim were diverted to Switzerland. Says Christian Larpin, a shareholder and the sole director of Elite: “This is judicial terrorism.”
Despite the settlement, the class action has thrust Elite and the entire modeling industry into an unflattering light and revealed how skin-deep its glamour is. Lawyers fighting Elite are questioning whether the Swiss parent, headed by President Gérald Marie and Larpin, and Elite New York, both private outfits, have hidden and diverted assets through a tangled web of subsidiaries, franchisees, and Swiss bank accounts to dodge taxes and court awards. Says Larpin: “We have nothing to hide.”
The class action, filed in the U.S. District Court for the Southern District of New York, alleges that Elite, founded in 1972, was a pivotal player in price-fixing for more than 20 years. Under the auspices of the International Model Management Assn. trade group, lawyers allege, the agencies met monthly at fancy Manhattan restaurants primarily to discuss fees. (The agencies typically receive 40% of the charge for an assignment: a 20% fee from clients and 20% of the model’s pay.)
Elite handed the plaintiffs what looks like a smoking gun. Monique Pillard, Elite’s former president, warned rivals in a 1986 memo they risked “committing suicide if we do not stick together” in setting fees. When an exec at another agency complained this might be seen as price-fixing, Pillard replied: “Ha! Ha! Ha!…the usual bulls–t!” An Elite spokesman says the quotes were taken out of context and the business is so competitive that price-fixing makes no sense.