A few short years ago, jewelry maker Alex and Ani LLC was the public example of a happy Bank of America Corp. customer. Now, it’s suing the lender for more than $1 billion in damages and alleging discrimination.
The female-led company says the bank fraudulently declared it in default of a $50 million line of credit last year and is driving the jeweler toward bankruptcy. It’s a stark turnaround from a 2014 commercial that touted Bank of America’s help in making Alex and Ani a “global sensation.”
The Rhode Island-based jewelry maker, which markets bangles and charms at its own stores and some high-end U.S. retailers such as Bloomingdale’s and Nordstrom, said it got the credit line in 2016 to fund operations, according to a lawsuit filed Thursday in New York federal court. But in December 2018, the bank declared the company in default without warning, setting off a chain of events that Alex and Ani claims led to $1.1 billion in expenses, lost revenue and reduced market value.
“Bank of America breached the agreement, fraudulently alleging a default that didn’t exist,” the company said in the court filing. “And for more than six months now, Bank of America has been both driving Alex and Ani towards bankruptcy and milking it for tens of millions of dollars in fees. The endgame is clear: Bank of America wants the women out of power at Alex and Ani.”
The jeweler and its founder, Carolyn Rafaelian, were featured in Bank of America advertisements to demonstrate the lender’s “commitment to diversity and the American dream,” the plaintiffs said. The companies had a “comfortable” relationship until December 2017, when Andrea Ruda took over as chief financial officer at Alex and Ani and cut costs, according to the lawsuit.
Bank of America serves as administrative agent on the credit facility for a group of seven banks that have taken the appropriate steps to enforce the terms of the agreement, spokesman Bill Halldin said in a statement.
“As the complaint itself notes, the company has faced serious financial challenges for nearly two years,” Halldin said. “The banks have worked closely with the company during this time. Bank of America’s demonstrated record of support for diverse businesses is well-noted and widely recognized.”
The bank has promised to invest in women’s economic empowerment and leadership by connecting female entrepreneurs to mentoring, capital and other tools that will help them advance their businesses, the suit says. In March, it pledged an additional $50 million for women-owned businesses backed by fashion designer Tory Burch’s foundation, doubling its commitment from five years ago, and said it planned to fund community development financial institutions, or CDFIs, that can lend to female entrepreneurs who might not qualify for traditional credit.
But in reality, “the company is decidedly retrograde in its views towards women, toward people of color and towards other protected groups,” the jeweler said in the lawsuit. The bank paid out almost $211 million in discrimination penalties since January 2000, Alex and Ani said.
The jeweler is represented by Harmeet Dhillon, an attorney who has taken on a number of headline-making First Amendment cases and was considered a contender to lead the Justice Department’s Civil Rights Division under President Donald Trump. She represented the University of California Berkeley Republican club after the school canceled Ann Coulter’s speech, and James Damore, a former Google employee who alleged the technology company discriminates against conservatives, men and white people.
Alex and Ani was founded by Rafaelian in 2004 and opened its first store in Newport, Rhode Island, in 2009. The company experienced quick growth, with annual sales jumping to more than $300 million in 2016 from $5 million in 2009, and it opened dozens of new stores and signed licensing deals with the Walt Disney Co. and the National Football League.
In 2015, the company sought to control its supply chain with the $140 million acquisition of the factory that makes its jewelry. Bank of America provided a $170 million term loan, as well as a revolving $50 million credit line that Alex and Ani could use to finance immediate needs, according to the lawsuit.
The case is Alex and Ani LLC v. Bank of America NA, 19-cv-6929, U.S. District Court, Southern District of New York (Manhattan).