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More about the Adrenalina CEO

By Tiffany Montgomery
October 21, 2008 5:39 AM

Adrenalina CEO Ilia Lekach is not new to the business scene, nor to Wall Street.

Lekach made public his bid for Pacific Sunwear yesterday, offering $4.50 a share.

It wasn't long before stories emerged about troubles at his previous company, the perfume maker Parlux, where he served as CEO from 1994 to 2007. I've had several emails and phone calls from industry folks pointing out his history.

I'll summarize a few of the negative stories out there about him. For balance, my partner, Andrew Horan, called Lekach yesterday while I was out and asked him to comment on the negative reports. He dismissed the reports as the work of short sellers. He also said his public relations firm would be issuing a formal statement soon in response to the negative stories. Below, Lekach's full comments come after the news stories about him.

First, the stories. Herb Greenberg, a Marketwatch columnist, named him "The Worst CEO of the Year" in 2006.

Here's a sampling of Greenberg's 2006 column:

"The winner of this column's Worst CEO of the Year award is Ilia Lekach of Parlux, a perfume maker best known for the Paris Hilton and Guess brands. ...

"That's just the opposite of this year's winner and runner-up, Lekach and Byrne, who epitomize some of what I believe make bad CEOs: Arrogance in the face of fumbled financials, and blaming short-sellers for a host of problems.

"Lekach, meanwhile, has appeared to treat Parlux like a personal fiefdom. I first wrote about the company in 2005 after it issued a press release saying it was going to seek strategic alternatives to "enhance" shareholder value. That would've been standard operating procedure for corporate America if its stock hadn't already exploded 10-times higher. (Needless to say, there was no deal.) This followed a botched plan in 2003 to take the company private at a split-adjusted $2 when the stock as trading at $1.50.

Then, this year, Lekach was back again with another LBO plan at $19.50 a share, or roughly double the stock's price at the time. That hinged, of course, on whether he could get financing, which he couldn't. The stock has since lost two-thirds of its value from its highs of the year. Lekach, with the help of his board, has a plan to stick it to shareholders if they approve a "change in control": He would get double his annual salary of $475,000 through early 2009 and twice his unexercised warrants.

"Adding insult to injury, at the company's annual meeting this year he lashed out at critics with an arrogant tirade, saying, "We have beaten you before. We will beat you again. Those of you who have no faith in me our company, you inspire me to higher levels. We will perform and succeed. Those of you who do not follow me, you will be left behind."

The Motley Fool posted a tough story yesterday about him.

PacSun Doesn't Need Shot of Adrenalina

By Rich Duprey

"This news doesn't pass the smell test. Tiny Adrenalina, a Miami-based sports gear and clothing retailer that trades on the Pink Sheets, is making a $293 million bid for teen clothing retailer Pacific Sunwear.

"While the surf-and-skatewear company could use a lift -- its stock is off about 80% from its 52-week high -- this looks like little more than a publicity stunt or a bid to boost Adrenalina's own stock price. That's because its chairman and CEO is Ilia Lekach, who has a rich history of playing such games.

"Back when he was running Parlux Fragrances, perhaps best known for its Paris Hilton and Guess! scents, he engaged in several similar dubious attempts to artificially boost the stock's price, all of which ended in failure. ...

"There's nothing to suggest he would be any more successful in integrating PacSun into Adrenalina.

Pacific Sunwear isn't having any of Lekach's antics. He said he was going directly to shareholders with his bid because PacSun CEO Sally Kasaks has repeatedly declined his offers to make a deal. Perhaps she's all too familiar with his game.

"Consider that Adrenalina has all of $10.8 million in assets, $329,000 in cash, lost $5.8 million in 2007, and is down $7.8 million over the past 12 months -- and once again doesn't have financing lined up to do the deal. No matter, Lekach says he's ‘highly confident (the deal) can be done.'

"As a shareholder I'm enjoying the boost the offer has given PacSun's stock today. However, increasing shareholder value has a far better chance of succeeding under Kasaks' turnaround plan, now under way, rather than in the sandbox in which Lekach is playing."

Lekach's response which he gave to Shop-eat-surf on the telephone yesterday:

Ilia Lekach was generally dismissive of the criticisms, without refuting any of the specific points.

"Let me tell you something. That article, it didn't say I was the worst CEO, it said I was the second worst. Do you know who was the worst? The CEO of Apple! I'm delighted to be in that company.

"Let me tell you something else. Greenberg, the Motley Fool, those guys, they just pile up s*** on people, that's what they do. It doesn't matter what they say."

He dismissed Greenberg's description of how he ran Parlux. "I've done a lot of things, I've had a lot of successes and some failures, and I hope that I've learned from the failures.

"Those guys, they're writing for the short crew, they're just very interested in driving the stock down."


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