Luciano Manganella spent 35 years transforming JasmineSola from a single boutique in Harvard Square into one of Boston's most fashionable chains. Its downfall, and now imminent closure, took less than 24 months.
"Jasmine was like a child to us," Manga- nella, 61, said in his first interview since the company collapsed. "When I go by the stores closing, I see tears."
Jasmine's demise began with an effort to rapidly expand the chain and line Manga- nella's pockets. In July 2005, he planned to merge with J. Jill, the Braintree women's retailer. But while Manganella was vacationing in Positano, Italy, his lawyer called with a better offer from retailer New York & Co. Days after returning to Boston, Manganella sold his 14 boutiques to New York & Co. for $30 million, hoping the apparel giant would turn Jasmine into a retail empire. Though Manganella knew little about his new corporate boss, he wanted to stay on as president of the Jasmine brand.
Less than a year later, New York & Co. fired Jasmine's founder over allegations of sexual harassment and tried to withhold $7 million it had promised him as part of the sale. A legal battle that cost Manganella and the company a total of $5 million ensued, while Jasmine shops foundered. Finally, New York & Co. last month said it would shutter the chain known for bringing designer brands such as Kate Spade and Juicy Couture into the region.
Manganella's experience is all too com mon for entrepreneurs who sell their companies and try to stay on. Even he quickly admits that after years of running his own show, he found it difficult to answer to a host of new bosses.
Still, the closures left him bitter. "Do not fire me and do not take my dream and destroy it," he said.
New York & Co. declined multiple requests for comment.
Manganella, an Italian immigrant who started Jasmine in 1970 with a $2,500 loan from his mother, had relied on instinct, not science or financial spreadsheets. He learned about women's clothing from his mother and sister, both seamstresses, and developed a keen sense of style. At Jasmine, named after the flower, he had given space to unknown designers, which made his boutique a fashion icon for teens and twentysomethings.
At first, Wall Street analysts applauded the deal as a way to help New York & Co. grow in the ultracompetitive specialty market. Already, it had 500 namesake stores in malls across the country, targeting cost-conscious shoppers with fashionable basics like $30 sweaters. Jasmine's sleek shops catered to a more affluent customer, with $200 designer jeans, and had more than $700 in sales per square foot, far above the industry average.
But within months, Manganella was shocked and frustrated by his loss of authority. He could no longer write company checks, much less pick new store locations and execute other decisions that had made Jasmine a soaring success. Executives also stopped providing him information on Jasmine's financial performance, according to court records from a 2006 lawsuit New York & Co. filed against him in US District Court in Boston.
The tension was palpable during a meeting at New York & Co.'s Manhattan headquarters when Manganella shouted his frustrations to executives. New York & Co. chief executive Richard Crystal, visibly agitated, got up and left the room, Manganella recalled.
"I never worked for anybody in my life," Manganella said. "I tried to be respectful, but I probably was not. I complained a lot. I wasn't trying to undermine or upset anybody. I was just trying to do what I know how to do."
The partnership tanked for good in May 2006, when an employee who worked closely with Manganella resigned. In a note to him, she wrote about an incident the day before when Manganella had placed his hands on her neck. She conceded he was probably joking, but putting his hands on her, or any employee, was inappropriate.
Manganella gave the note to the human resources department, and after New York & Co. contacted the woman, she then complained of sexual harassment, according to court records. New York & Co. put Manganella on administrative leave and hired an outside firm to probe his conduct. The company's investigators found a sexual harassment lawsuit filed by a former Jasmine employee in 1999, which Manganella had settled for $15,000. New York & Co. also confiscated Manganella's office computer as its investigators interviewed current and past Jasmine workers.
Manganella was restricted from entering company stores or talking with Jasmine employees, aside from his wife, Stacey Manganella, the head merchandiser. On June 6, 2006, investigators met Manganella and presented him with sexually explicit photographs found on his computer. He admitted to taking some of these pictures, including ones depicting a former employee with whom he had an affair several years before.
Manganella's lawyer wrote letters asking for the specific accusations against him, but the company never replied, according to court records. On June 22, 2006, New York & Co.'s Crystal, the chief executive, had a letter hand-delivered to Manganella's home.
"Luciano, I am personally disappointed that these allegations were corroborated, but under the circumstances, we have no choice but to do the right thing by the company, by our associates, and by our shareholders and terminate your employment immediately," according to a copy of Crystal's letter included in court documents.
Days later, New York & Co. filed a preliminary injunction in federal court seeking to prevent the release of $7 million that was scheduled to be disbursed to Manganella on July 18, his one-year anniversary with the business. Manganella's attorney countered that New York & Co. violated his contract by not giving him the chance to remedy his conduct within 30 days of written notice.
Meanwhile, New York & Co. began changing the formula that made Jasmine a success, narrowing the number of brands offered, buying lower-end merchandise, and opening bigger stores. New York & Co. started outfitting all Jasmine stores with the same amount and type of items, eliminating another of Manganella's innovations: merchandise tailored for each store, with lower-priced clothes for the college students shopping at Harvard Square, and higher-end clothes for Newton and Wellesley.
The change meant a new Miami store received chunky sweaters and corduroy pants in the middle of the summer - the same back-to-school items Northeast stores featured, according to Liza Baird, who had worked at local Jasmine stores, and moved to Miami in April 2006 to open the first Jasmine shop in Florida. Sales were so poor, Baird said, that some days the store barely broke $1,000.
New York & Co. held frequent sales at Jasmine as unsold clothes piled up at the warehouse, said Baird, who added that she does not believe the sexual harassment allegations against Manganella.
Frustrated with the company's direction, Baird quit in January and returned to Boston. "To see Luciano create this amazing store over 30 years, and then watch New York & Co. take two years to tear it apart, it's a disgrace," she said.
Manganella's dispute with New York & Co. was heard by arbitrators who ruled in April 2007 that he violated the company's sexual harassment policy, his conduct was "reprehensible," and he "failed terribly as a leader." But the panel agreed Manganella was entitled to the opportunity of remedying his conduct within 30 days of written notice, and suggested the company moved hastily to fire Manganella because it wanted to recoup the $7 million. The arbitrators awarded Manganella the $7 million, $305,291.25 in interest, and $2 million in attorneys fees.
While the legal battle dragged on, sales at Jasmine slid and stores stumbled.
In October, company executives decided to liquidate Jasmine and close the chain. In all, the failed deal cost New York & Co. about $67 million, Raymond James & Associates analyst Samantha Panella said.
"It really unfortunately has been a perfect storm," Panella said. "Jasmine was a totally different business than New York & Co., and they didn't know how to run it without the founder they fired."
Neon yellow and red signs touting 60 percent off cover the windows at Jasmine. The Manganellas have tried without success to purchase the Jasmine name from New York & Co. Luciano Manganella is planning a new boutique chain featuring fashionable active wear. Mall operators are interested, but Manganella cannot proceed because his contract prohibits him from competing with New York & Co. He is trying to get released from that provision. Stacey Manganella, 45, quit after her husband was fired.
"I didn't really know who New York & Co. was and I blame myself for that," Manganella said. "If I had known this thing was going to move this fast and end up this tragic, I would have been more cautious, more careful."
Jenn Abelson can be reached at abelson@globe.com.
