Distressed: How Tobey Grey Came Apart at the Seams
From the outside, the boutique jean company Tobey Grey was a booming success that turned its suburban owner into an unlikely trendsetter. Then everything came apart at the seams.
Everyone agreed: It was the best party Steve Simon had ever thrown, and nobody loved a good party more than Steve Simon. The occasion was the spring 2012 grand opening of National Jean Company’s Newbury Street flagship, the local mini chain’s third, and most opulent, location yet—a beautiful, 2,200-square-foot store featuring multiple rooms, vintage chandeliers, and a fireplace. Simon had been building to this moment since he first brought National Jean to Newton in 2004. Newbury Street would signal that they’d really made it.
Many people worked hard to make the party happen, but it was Simon who sewed the pieces together. Early on, he’d declared he wanted to secure an appearance from Nicole Richie, whose two fashion lines he stocked, even as many around him thought the suggestion was ridiculous. As one former staffer put it, “Everybody’s saying, Nicole Richie’s going to go to Massachusetts?”
That night, more than 150 guests piled into Simon’s new store. There was a red carpet; live music; platters of champagne; an A-list crowd of locals that included Bianca de la Garza, Tonya Mezrich, Linda Holliday, maybe even a Red Sox wife or two—and, yes, Nicole Richie. “Getting Nicole was all him,” says Kristen Daly, an executive at the store’s then-PR firm, the Goodwin Group. “Whenever we threw a party, I’d always be up half the night wondering if people would come. But they always did. He knew how to work the angle.” Simon would hustle for discounted liquor or a band willing to play “for the exposure.” It was an easy pitch. As Daly says, “Everyone wanted their name associated with National Jean.”
Over the previous decade, National Jean had become a fixture of “the new Boston”—the one that cared about fashion just as much as New York did. It sold denim and casualwear that was current and edgy but still affordable—appealing to suburban soccer moms who didn’t want to look like suburban soccer moms, as well as their label-savvy daughters. “People always knew they could get the ‘hot brands,’” Daly says.
Simon ran the shops with his two adult daughters, Jill and Stacy, and the store was “a love affair with work and family and retail,” says Laura Jenks-Daly, who spent eight years working as a consultant for National Jean. “It was really a very fun place to be.” Steve and his wife, Sheryl, a successful realtor, were well known throughout MetroWest, and the boutiques hosted successful charity fundraisers for various causes, from Jewish Community Housing for the Elderly to the American Camp Association New England’s Campership Fund, which sends underprivileged kids to summer camp. “I never got the impression he was concerned about his profits,” says ACA New England vice president Jason Silberman. “He just wanted to create a successful event for us.”
From the outside, business was booming and only seemed to get better. Just over two years after the opening of the Newbury store, Simon split from his parent company to go out on his own. His National Jean stores became Tobey Grey—a rebrand meant to reflect that the business had become “much more than just a denim store,” Simon said at the time. He opened new locations in some of the toniest suburbs, including Andover and Weston. He brought on investors to give the company a boost of capital to help fuel the rapid expansion. But, as angry investors and a recent lawsuit now reveal, it wasn’t long before the whole thing began to unravel.
Simon wasn’t a natural fit in the fashion world. He didn’t go to design school or work his way up on a boutique sales floor; neither was he a stylish young woman who’d always dreamed of opening a store with her best friend. He was a suburban dad, and he mostly looked like it: balding, with a bit of a paunch, and almost always smiling. He and Sheryl had met in the mid-’70s when she was a student at the University of Hartford and he was in law school nearby. They married in 1976, and Jill was born a few years later. In the mid-’80s, Simon founded International Packaging Design in Brighton, making shopping bags for retail stores. For most of Jill’s and Stacy’s childhoods, the family lived in a modest house on what became very desirable land overlooking a golf course. Once they sold the house, it was “as if all of a sudden they had a life change,” says a former neighbor. The store soon followed.
Simon liked to say he transitioned into retail because “it was cheaper to open a store for my daughters and wife than it was to keep up with their shopping habits,” but he seemed to be the one who was enamored by fashion. By some accounts, he owned some 250 pairs of jeans. “He always dressed well,” says Jenks-Daly, who worked the back of house and occasionally accompanied Simon to New York on buying trips. “I remember Sheryl always saying that he was the one that would take the kids shopping. Because she hated it, and he loved it.”
What Simon lacked in experience, he made up for in hustle. He brought the Long Island–based chain National Jean Company to Newton as a franchise, and some say he had dreams of building a small empire he could pass on to the kids. “Steve had a natural gift for retail,” Jenks-Daly says. She first met Simon when he was her daughter’s grade school soccer coach. “He could bring the passion out in the kids, and he could do that in that store,” she says. “He wouldn’t ask anyone to do anything that he wouldn’t do.”
As the business grew, however, the retail landscape began to change. In the early days of National Jean, Jenks-Daly says, Jill and Stacy were the ones setting the trends and showing clients how to wear them. But over time, social media “influencers” began to make in-store stylists less essential. As people shopped online, it became harder to get customers in.
In 2012, Simon began designing and selling an in-house, made-in-the-USA line under the label Tobey Grey—a moniker derived from a short list of boys’ names Jill had assembled when she was pregnant with what turned out to be a daughter. According to professional acquaintances, Simon hoped the private label would eventually comprise most, if not all, of the stock—one reason, he later said, that he made the name change. “The reason private label is appealing is because you can make things cheaply and get a huge margin,” says Sari Brown, who’s owned the Newton Highlands boutique LuxCouture since 2006. “But the problem is that it’s also a lot of work—choosing styles and fabrics, planning for fit—and most retailers are not designers.” Pieces often lack the detailing that can make them special, and have fit problems. “And if it doesn’t fit and nobody buys it,” Brown says, “it doesn’t matter what the margin is.”
Before long, Tobey Grey was mired in debt and thrashing to stay afloat. In late 2013, the relationship between Simon’s National Jean franchise and its parent company had soured and “ultimately deteriorated,” according to a U.S. District Court judge. Denim Habit, the LLC that had acquired the parent company, claimed that Simon had fallen behind on his weekly royalty fees and sued. After the court agreed with Denim Habit, the parties settled the case, but the relationship was over.
Making matters worse, Jenks-Daly, whom Simon had relied on for management training and retail knowledge, had quit and moved to Florida. To help him, Simon brought on a COO named Ron Lipof, a Newton business consultant and entrepreneur who’d built a career as a problem-solver. They’d known each other growing up, and Lipof’s skills were a perfect match for Simon’s ambitions. “He had a vision of expanding and growing the stores,” Lipof says. “I thought the challenge of opening new stores was a good challenge—it was a tough retail environment, but we had a nice, thoughtful plan and we were executing it.” Lipof’s job was to identify new locations, work with landlords, and get the new stores open. It seemed like a promising move.
In early 2014, Simon and Lipof began putting out feelers for potential investors. In June, Lipof made a presentation during which he allegedly projected $8.7 million in revenues across all Tobey Grey boutiques for 2015, including proposed locations in Lynnfield and Hingham, as well as online. He hyped Simon’s success growing his National Jean franchise into one of Boston’s leading independent retailers. It was convincing enough, and in December 2014 the company was promised a $500,000 cash infusion from a group of three Boston-based investors—MJTC, Doc Ventures, and DMI Group—intended to fund new locations and to provide “general working capital.” But by Christmas, the Newbury Street location had closed in a cost-saving measure.
Three months later, the money was gone.
The investors’ first sign that something had gone seriously wrong came in February 2015, when Lipof disclosed the actual 2014 earnings during a meeting with the new shareholders. While the original pitch had allegedly projected $437,000 in profit, using a common metric known to investors, Lipof reported a $470,000 loss; revenues were 23 percent lower than the projections investors say he cited in June. The company blamed a disappointing holiday shopping season. Simon did not attend the meeting.
The investors knew from the start that Simon wasn’t “necessarily the best bookkeeper,” says investor David O’Connor of Doc Ventures, but they had liked what he’d managed to do with the brand. This, however, was bad. “Everybody kind of sat back and went, All right, well, let’s go through the process, what’s going on, where’s the money, what’s happening?” he recalls. “And it’s been three years, and I don’t think we’ve got a straight answer on any question ever from anybody.”
Things only got worse from there. In a January 2016 letter, lawyers for the investors claimed that good-faith steps they made to help the now evidently flailing company “right the ship” were met with “resistance, an endless string of delays, roadblocks, and excuses, and an overall attitude of indifference.” They also accused Lipof and Simon of violating state and federal securities laws, alleging that they had used a “shockingly high percentage” of the investment funds for purposes other than those agreed upon—namely, to settle debts later alleged to be in the neighborhood of $1.4 million. They demanded an immediate $1.5 million repayment, plus $5,000 in legal fees.
As far as Simon and Lipof were concerned, they hadn’t done anything wrong. “We worked with the investors from the beginning,” Lipof says. “That’s how everything was determined.” Expansion, more than any other factor, had left the company exposed, says Simon’s lawyer, Charles Bennett, and the numbers had changed after the opening of an Andover location. Then, a premature opening in Lynnfield’s MarketStreet set the company back further. That summer, it was running so short on funds that it couldn’t pay Lipof, so he left. “Retail had been, for a year and a half, slowing down and slowing down,” Lipof says. Anyway, Simon couldn’t repay the investors even if he wanted to. But they could still try to make him.
In January 2017, the investors sued. Their case, filed in Suffolk County Superior Court, accused NJC Boston; Steve, Jill, and Stacy Simon; and Lipof of fraudulent and negligent misrepresentation. The company, they said, used a “bait and switch tactic to fraudulently lure” them to invest, “providing revenue, profits, and earnings projections it knew were inflated.” They reduced their request from $1.5 million to $447,000, plus interest and legal fees.
“This is nobody’s first rodeo. This crew knows how to dig something apart and determine a valuation,” O’Connor says. When they signed the operating agreement, the investors were told that Simon owed TD Bank $500,000—that was it. “Then we found out there’s an additional $900,000 of liabilities he never told us about,” consisting of credit card bills; gift certificate and store credit liability; personal loans from Stacy, Jill, and Sheryl; and more than $700,000 in accounts payable, O’Connor says. “He was basically on a spiral to bankruptcy and never told us.”
Bennett, who represents the defendants, says the investors “were well aware the finances weren’t that strong” and had plenty of opportunity to do further due diligence. “We’ve gone through some discovery and…so far, all they’re able to produce is emails complaining about what happened,” he says. Perhaps most important, he claims the investors knew the financials in the pitch had changed before they wrote the checks. Moreover, “the way the money was structured was that it was for general use of the company,” meaning paying down debts was a legitimate use. Lipof, too, claims the company had been transparent. “The investors were provided with tax returns and all the information that was available,” he says.
Particularly egregious to the investors was the fact that even as Tobey Grey struggled to pay its debts, it was paying generous—even outlandish—salaries. In the complaint, the investors allege that both Simon and Lipof received six-figure salaries, Jill and Stacy were each paid approximately $70,000 to work about 12 hours a week, and bookkeeper Andrea Lipof, Ron’s wife, received $52,000 for about 15 hours a week. One motion filed by attorney Christopher Brown on behalf of the plaintiffs claims that many of the 253 pages of discovery Simon submitted—paperwork that was meant to include tax returns, bank statements, and other financials associated with the business—were duplicate documents or investor documents for other, totally unrelated companies. The investors viewed it as either an attempt to dodge them or a sign that the books were a mess. Simon blamed the dissolution of his company and the sale of its computer servers, with the result that he no longer had access to the company’s files.
In June, a judge granted a motion to attach Simon’s Wayland house in the amount of $560,000, noting that “there is reasonable likelihood that Plaintiffs will prevail on their negligent misrepresentation claim” and that Simon knew or should have known the forecast in the 2014 pitch was false. In August, Jill and Stacy filed a separate motion to remove themselves from the case, which was granted in October. Finally, in early November, Simon filed for bankruptcy, which stays the civil case, essentially putting it on a shelf. It’s “basically the middle finger to everybody—a thanks for the money, now good luck getting it back,” O’Connor says. In response, O’Connor says he plans to reach out to law enforcement. “He kind of left us two options: throw our hands up and walk away and let him keep the half million dollars or, if nothing else, make sure he at least pays the price through the legal system. So I’ll take that route.… Now I’m just hoping he spends some time in jail.”
Either way, the lawsuit seems to have killed Tobey Grey. By February 2017, a month after investors sued Simon, all of its stores had closed. For a short time, this was under the pretense of “merchandising for spring!!” By summer, though, the Newton and Wellesley boutiques had reopened as Denim & Soul, a national chain owned by serial entrepreneur turned reality star Marcus Lemonis, made famous by his turn on the CNBC reality show The Profit.
The party, it seems, is over. Then again, people don’t want to go to boutique parties anymore, which may have been part of the problem. “Even when things were good, it wasn’t easy trying to stay a step ahead,” Kristen Daly says. “The Boston social scene has its ebbs and flows, and that particular genre had its peak time in the sun.” What worked five years ago doesn’t necessarily work anymore.
If you ask Steve Simon, of course, he’ll tell you that while he may be down for now, he’s not out. In October, he declined to comment for this story but said, politely and with gratitude for having been thought of at all, that he was hard at work on his next project—the consummate salesman. “I would love to tell you all about everything in person,” he wrote by email. “I promise you’ll have the first shot at a great story.”