Nike Sues Former Employees in Promotional Sneaker Sales Scheme
Nike, Beaverton, Ore., is suing two former employees, their significant others and a sneaker collector, who each had a role in stealing and selling Nike’s promotional shoes in a plot that stretches back to 2006.
Nike employed Kyle Keoki Yamaguchi and Tung Wing Ho, both of Portland, Ore., as promo marketing managers. The pair allegedly ordered Nike promotional sneakers, known at Nike as “Look See” shoes, selling many of the stolen sneakers to collector Jason M. Keating, of Sanibel, Fla. for their own profit.
Nike filed a lawsuit April 28 against Yamaguchi, Ho and Keating—along with Yamaguchi’s wife, Shu-Chu Yamaguchi, and Ho’s girlfriend, Denise Wei-Ching Yee—with two counts of trademark infringement under the Landham Act as well as a count of conversion, fraud and breach of fiduciary duty. Kyle Yamaguchi, Ho and Yee also were charged with breach of contract, as all three are former Nike employees.
“In breach of trust placed in them by Nike, defendants Yamaguchi and Ho used their position as managers at Nike to steal unique and/or custom athletic footwear in order to profit from the sale of those shoes to collectors of rare athletic shoes, known in the industry as ‘Sneakerheads,’” Nike claimed in the lawsuit.
Kyle Yamaguchi was the promo product manager from July 2006 until he left to launch his sunglasses business LookSee Goods in January 2012, according to court records. Before he departed, he handpicked Ho, who had started at Nike in April 2005, to replace him.
“Yamaguchi provided training to Ho in ordering products, and introduced him to his method of ordering excess promo and sample footwear for use outside the scope of his job duties,” Nike said in the lawsuit.
Certain employees, including the promo product manager, had the ability to order promotional or sample sneakers, which resemble an existing style but have tailored features for an athlete, team, celebrity, etc. These styles are rare, and some sample styles are never released publicly, according to the lawsuit. These limited-edition shoes can fetch $1,000 to $10,000 or even more on the market. Nike estimates Kyle Yamaguchi received hundreds of thousands of dollars in sales profits.
When Ho was promoted to promo product manager in 2012, he also is believed to have stolen promotional shoes that he ordered from Nike’s China manufacturers, according to court documents. He then allegedly would strike a deal with Yamaguchi, who allegedly sold them to a sneaker collector like Keating.
Keating allegedly purchased various shoes from Yamaguchi that ranged from $5,000 to $30,000 via a wire transfer to Yamaguchi’s bank account, according to court documents. When the price was higher, Keating is believed to have traveled to Portland, Ore., and taken out cash from various bank branches to pay Yamaguchi. Upon receiving the payment, Yamaguchi shipped the sneakers to Keating’s home. Keating is believed to have sold the sneakers to various shoe boutiques across the country. Between November 2012 and July 2013, Keating’s account had $221,320 worth of cash deposits and fund transfers.
Ho received checks from Yamaguchi totaling $104,000 between November 2012 and March 2013, according to court documents. When authorities obtained a search warrant for the home Ho and Yee share, they found 1,941 pairs of shoes and an undisclosed amount of cash. Both Ho and Yee, who worked for Nike since July 2007, were terminated in March due to “circumstances related to this litigation,” Nike said in the lawsuit.
“As long-time employees of Nike, Yamaguchi, Ho and Yee knew they were not authorized to order, take and sell Nike’s promotional products for their own personal gain,” Nike said, according to court documents.
Nike is seeking to recover compensatory and punitive damages, profits from the sales, restitution, and an injunction preventing the defendants from continuing to sell stolen sneakers.
The U.S. Attorney’s Office’s case remains under investigation, and so far there has only been one arrest, according to The Oregonian. Keating was arrested April 16 in Portland, charged with receipt of stolen property. He was released the next day with orders prohibiting him from contacting the other defendants or selling shoes, according to The Oregonian. His arraignment is set for May 15.