Fashion label Federation’s resurrection a cautionary tale for importers


Federation fashion owner Jenny Joblin is back at the helm of her upmarket clothing business after surviving a perfect storm of tax dodging charges and liquidation.

The 38-year-old mother of three has battled to keep her Kiwi brand alive by selling her house, paying thousands of dollars to the bank and buying back her firm from the clutches of circling, prospective buyers.

A four-year long series of personal and professional crises ended earlier this month, when Joblin pleaded guilty in the Auckland District Court to three charges which revolved around defrauding Customs of revenue.
She was fined $40,000, and a further $15,000 for another label, Minti. Her former business partner and ex-husband Nick Clegg is still fighting the charges.
Now, Joblin is working to rebuild her business with the help of her six loyal staff who produce high-end streetwear from a workshop in Takapuna, on Auckland’s North Shore.

“I just thought at the end of the day, the 15 years of Federation was worth giving it a go,” said Joblin.

Joblin’s troubles began when a shipment of clothing made in China was seized in 2014. Investigations showed that the shipment had been undervalued and the duty was significantly underpaid.

As things went on, it became clear that the factory in China had been doing this for some time.

Joblin said she knew nothing about it. They had an automatic payment plan with their Customs agent and never noticed there were invoicing discrepancies between the factory and the agent.
She said: “It wasn’t considerable, it was just a little bit less, so it wasn’t an odd amount, because of course we pay such a higher price for our garments than others.

“I spoke to the factory myself and said why have you been doing this? They said, we just do it for everyone, we thought it was a favour for you.”

Joblin started in the fashion industry after working part-time for fashion guru Karen Walker, and founded Federation with Clegg 15 years ago.

The label turned heads during early appearances at NZ Fashion Week, and eventually began turning over several millions of dollars a year.

It was stocked for a time by Selfridges and at one point was distributed in Europe and America.

But when the shipment was seized, Federation was already under pressure.

Facing difficult exchange rates, increasing competition and other problems, Clegg and Joblin got a short-term bank loan of more than $500,000 to get their shipment released.

Inside was Federation’s winter line and they needed to meet their orders before the clothing lost too much value.

When the bank called in its loan, Federation went into liquidation in February owing just over $1.5 million – $1.05m to the bank.

Joblin says the pressure took a toll. “During the time it was happening I had three children under four.”

She and Clegg had parted in 2012 but were still working together. He is no longer a director but remains a half shareholder.

Joblin initially faced 13 charges, the bulk of which each carried up to six months’ jail, or a fine of up to $10,000 or three times the value of the goods.

Her lawyer, Michael Lloyd, says Joblin was facing fines of potentially millions of dollars. But he believes that anyone importing goods from China could fall into the same predicament.

“My view is this is endemic in the fashion industry and the suppliers, just as a matter of course, supply undervalue invoices. It’s just part of their service, even if it’s not explicitly stated.”

Joblin said she pleaded guilty even though it went against the grain because it happened on her watch.

“That’s the bit I’ve worked through because obviously even to take those guilty charges didn’t rest well with me, but we were directors and that was our responsibility.”

She also accepted the processes they had at the time assumed too much. Now “everything gets reconciled back.”

She is just happy it’s over.

“It’s just been the longest process on the planet. Two years down the track I’ve finally got my life back.”

Joblin’s story has left many in the fashion industry nervous.

“I was talking to another person yesterday and she said, ‘Jenny, it could just have to happened any of us. It’s made all of us that much more aware’,” she said.

Now, she thinks guidelines about dealing with offshore suppliers and paying duty should be a part of fashion degrees.

Lloyd said Joblin and Clegg’s mistake was not cross-checking the invoices they received from the supplier with the copy invoices “that they were thought straight copies” going to the Customs brokers.

“If they’d ever looked at the two and married them up, they would have seen that the ones going to Customs broker were lower.”

Matters have taken a brighter turn for Joblin since she went into liquidation.

“It had really taken a toll on me so I was really open to what happened and I just wanted the best outcome for the brand,” she said.

However, the best outcome turned out to be herself. A number of buyers showed interest in the brand but Joblin’s continued involvement seemed to be a condition.

“The liquidators would say to everyone, you’re buying a business out of liquidation, Jenny’s not an chattel.”

The bids were also not that high. So after encouragement from others, Joblin bought the label back.

This week she was photographing her next season’s line under the Federation name.

She has also honoured all the gift vouchers issued, even though she admits it has been costly.

When the liquidation process is finished, Joblin is hopeful most creditors will be repaid. Some of the debt is inter-party lending with a related company. The Chinese factory which caused the mess is a creditor.

“There’s only so much I can do,” she says.

“I really worked to make as much as possible to pay everyone I could. ”

Joblin admitted her focus used to be the creative design side of the business but she said failure has taught her a great deal.

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