Guilty Plea and Final Reflections

Welcome to the Corporate Gossip podcast, the business podcast for gossip lovers. You don't need to know anything about business to enjoy the cororporate Gossip podcast, but you might learn something along the way. Today's episode Castle Devil Rse products Welcome back to the corporate gossip podcast. I'm your host, CBia S Gorn Becca Platsky. I'm here with my co host. Out of office reply guy Robby Slovk And you know, Rabbie, in these times when so much is so unpredictable, I love a moment to take respite in classic fraud. And what we have here is the Leanne Moriarti or Colleen Hoover or James Patterson a fraud. It's a beach fraud. Oh, just a comfort blanket of fraud. It really is. I just love it. L just the classic juicy fraud elements that pair perfectly with a Stanley half full of Rose and an above ground pool Slish splash. Oh my God, It is summertime, baby. We need this. I love this. I know It's gonna feel good, guys. It's so much fun. This is like a hallmark fraud. It is a hallmark fraud. It has all the great elements. Remember how I say like anyone can do fraud You really don't have to be especially bad or broken or cunning. You can literally be just a frumpy lady with bad fashion and she just doesn't look like a lady that would do fraud. Does she look like a fraudulent lady? No, why that's why she's such a great fraudster. Yeah, yeah. The person you would suspect the least. I also love you as an inspirational salesman for fraud Guys,one anyone can do fraud. It doesn't matter what you think, It doesn't matter where you've been or where you're going or what you, even you can defraud people. It's true. Yeah. I consider and in this way, you guys, I don't know if you'll be surprised to hear me say this. I actually consider fraud morally neutral. Okay, okay Literally a product of circumstance And that's why we have regulations and corporate governance and separation of duties and things like auditors like I was That check for all of the things that I just noted, because if those things aren't in place and you have the element of the elements of the fraud triangle, rationalization, pressure and opportunity. If those three things are present, and you don't have corporate governance, don't have you're not following regulations, you don't have separation of duty, you will do fraud. Youre gonna do fraud. You're gonna do fraud evenven if you look like an elementary school principal that could happen to you. So in three months On august fifth two thirty PM accccording to the transcript that I pulled from Pacer, I went crazy on my pacer this for this episode, which is where you get all the court documents for the SDNY. This woman, Christine Hanssinker sererver room just lights up, don' like shit back. Becca is on again. This woman, Christine Hunicker, will be at sentencing at the SDNY courthouse. She faces up to twenty years in prison and restitution payments up to three hundred million dollars. This is one of the biggest financial frauds in recent history. and I'll be there You're gott to be there. Yeah. Do you wantan to come? August fifth ty Yeah in town. Yeah. you guys can alloin us too. It'd be fun. We can do a little meet up. This comes after Christine Hunsicker pled guilty earlier this year to fraud that was uncovered in march twenty twenty four, involving a few of her companies, including Guinnie B, Castle, and P one hundred eighty, or as the lawsuits call them, the Hunsicker Enterprises Mhm. you're just, you know, you're like when you have that much like money at your disposal after a fraud like that, you know you're just dead to rights if she's making a plea deal. like if she's not If she's not fighting it, like it's got to be so clear. Yes. Now, if you were an employee of any one of these companies just about two years ago and you were working in the fashion e commerce space You would have been in a company wide call where Castle CEO JP Singh, who replaced Christine after she was fired and COO George Goldenberg would explain to you that the company that you are working for is out of money would be bankrupt in three months and you're put on furlough effective immediately You're probably too stunned to speak as the CEO JP who's conducting the call while driving exxplains to you that he and George didn't have nothing to do with nothing. So don't come looking at us You ain't know he's driving. There's just a giant fire in the background onhind his car. It just like guys, there's been a fire I've gotten out, I've got bad news for you It's important for all of our employees to know that no one on the management team has been found to be aware of or complicit in the violation of company policy. Again, I love language. Language is the best and has been found to be. and it's like we're not we haven't. We're just saying nobody caught us. He said, We have learned that Christine provided certain investors with misstated financial statements and falsified audit opinions Boy were we mad? A we mad and we learned about that That's so interesting to you as an employee because you're like It's weird JP and George and Christine because us employees have been talking about this for years We fucking knew it. We knew something was up. We had questions about this, We asked you guys in town halls, and we ask you guys in emails that will ultimately be subpoenaed. And now you guys are saying you had no idea. That's interesting. We have been found to not have heard those questions you were asking because we have found our fingers in our ears and we found ourselves to be humming a tune very loudly So here is Christine Hunziger, now, she's leaving I know that I could see those bricks anywhere. That's very she's wantorting a very different look. She looks interesting now at least. Yeah. So let's back up and explain how all this happened and then we'll dive deeper into the most interesting parts So this company was started in twenty eighteen. It was called Castle, and it's stylized differently It's stylized Capital C, lowercase A A, capital S TLie Cothing as a service. twenty twenty six, everything's AI, right? Your company is If you put AI in your name, your sho is worth forty billion dollars. Yeah ye twenty twenty one is crypto twenty eighteen is everything as a service. Everything as a service is another word for subscription models. So if you're an Adobe user like me, you used to be able to buy the software every couple years for one hundred and fifty dollars and youd get to use it, now they charge me seventy five dollars a month for this suite And it charudged me a little less because I lied and said I was a student. Nice This is like what I like to call consultant crack because it's literally set it and forget it revenue. And that's why everything is a fucking subscription now because it's so easy to to do Um Christine wanted to disrupt the apparel business with clothing as a service. So Castle was like an enterprise software that would let any brand rent out their clothing to customers. Now another trend that was really popular at the time is Rnt the rununway, but it would be brand specific So you know, rent the runway or maybe you have Nly where you can go on and you can like rent a top for an event that you never want. Yeah, you're right Nly. Yeah You would never buy this top or this dress, but you could rent, you know, for forty dollars, right? But This brand would set up the back endnd and like the software for stores like Loft expxress Banana Republic and provide the inventory. and rather than close from these brands going to outlets, They'd go to these brand specific rental websites where you would forord ninety five dollars a month For An Taylor, you could rent, quote, excess an unused inventory from past seasons. Okay Castle would, quote, maximize the amount of profit earned on a piece of clothing, said Christine. Yeahuh. And I can see how a CEO at Anne Taylor Loft would be like, yes. Right. Yeah. You knowre were doing now like a bunch of suckers were selling a shirt one time We never We never make a cent of revenue off that shirt once it's left the dealership R Yeah. Now You may be thinking Why would I spend a hundred dollars hundred a month renting old clothes from Anne Taylor when I could buy them on DepPop, for example, for twelve dollars?y would pay for an an Taylor subscription service specifically when I could use a service like Rnt the Runway for the same price and get way more. Way more stuff than just just be locked into the an Tayor ecosystem. It just doesn't make any sense. These are questions that normal people would ask Unfortunately, investors in Castle like Bill Ackman. Oh, I love one when Bill Aman. I knowump U May I be defrauded by you Apple Chairman John Henesy, Facebook billionaire Jim Breyer KKR co founder Henry Kravis and sprinkle of Peter Teal These are not normal people who would ask those questions. They are much, much dumber So when on an investor call, Christine says, que, noobody makes money in apparel. We have the solution. We make money for everybody likeike this is there again, they just say stuff and like there's giant apparel brands like, I don't know, Nike or whatever Zara they're m make a ton of money, Th then they just show up and be like, actually no one's making money in apparel They don't say Let me Google whether that's true or use my critical thinking skills to figure out that doing two way shipping Dry cleaning, inspecting of a forty five dollars blouse from Express is actually more expensive than trying to sell it to a discouter for five dollars. Let me backhand defend some of these some of these billionaires here Okay, which is guys like Peter Theal. I think was the worst. I think he does know that, but I also think he's just like, how do we move everyone in the world into a subscription service? So they own nothing and I own everything Yeah. And everyone, I am not just landlord, I am Ethlord and they are all earth tenants who own nothing I'm going to own your blouse with a built in necklace. And if you want to if you want to wear it,'s look, there's a pay per wear charge. Okaykay. You rent it, but that doesn't include the putting it on fee. And if you want to go out of the house in it, then you're going to have to pay the going out of the house fee U And keep in mind, they would have found out if they Googled that their biggest competitor Rent the Runway, who'd been doing business since two thousand nine had never made a profit I I didn't know They could have found that out And we'll go into more about that later. And they didn't look at the executive board of Castle and think, huh None of you guys have experience in retail whatsoever, and that's when she hits the old Larry Allllison classic, quote Retail is an almost two trillion dollars industry that hasn't really been disrupted by technology. Oh, it needs to be. She's just chewing on ninety dollars lettuce from Hawaii and she's like,one someone needs to deal with this. And they say, shut up, lady, you had me at ass And the money starts pouring in. like she is dripping in money. Quote, ourur valuation is now at nine hundred fifty million. She says during one meeting, according to former employees in twenty eighteen, hereere's the results, okay. Now this is a chart that I'm showing Robbie and it has what they reported, which looks like pretty much hockey stick growth comppared to the actual yellow line, which is there which is the actual So do you want to tell people if they're listening what you're seeing? Yeah, sure. So this is it's like a bar graph that is exponentially jumping up. twenty eighteen, it's huffering maybe around like, I don't know, fifteen million, let's say. And by twenty twenty four, it's at eight hundred million with just a massive leap from twenty twenty two to twenty four. Like it jumps up literally eight hundred million dollars over the course of two years. But then the actual is that revenue? What is that number? Revenue? The actual revenue is For a lot of it, it's a flat yellow line and then is the black bars that they're indicating what they're reporting skyrocket up the yellow and actually tanks down to exactly zero, just about. It's really amazing Don't believe her. Check out these perfectly legitimate financial statements. You can barely tell I added those zeros and Sharpies and made all the ones from sevens, just like crazy Addie This is like I get I get also why these guys love the subscription model because it lets you do Eron accounting. Yeah. Like it lets you just be like, oh, well because nine people signed up, then we got nine thousand dollars or whatever because over the course of their let's just assume they're going to be members for thirty years because we have and at some point they'll probably upgrade and let's just say we've booked that revenue today And let's forget that we're going to make it really difficult for them to cancel and hopefully they forget and we're just going to charge them thirty dollars for nothing for the rest of time. And let's also pretend like we're not paying huge overheads to maintain a warehouse and dry cleaning services and blah. Anyone used their eyeballs Loo at you, Bill Akman, or spoke to a human people in the mall at an expxress or went on Reddit. Can you imagine can you imagine Peter Thal doing that? No I was at the mall in an exppress They would have found that no one was using this service. No one was renting clothes from Express, No one was renting clothes from Antayler, Definitely not almost a billion dollars worth of people They would have found that that eight hundred million revenue figure in twenty twenty four was closer to sixteen million, whichich just for scale, that would be like if I told you I had one hundred thousand dollars in the bank and I actually had two thousand dollars in the bank. Now, people who knew her well, employees who weren't bought in on the bullshit They spoke to Bloomberg in the main article that we read for this podcast, that I'll link in the show notes And they knew this was all bound to happen, right? They called her accccording to this article, a quote, hyper competitive manipulator who blew past the startup ethos of fake it till you Make it. There were times when I saw her walk right up to the line of what would be considered vision and what would be considered false, and just completely outside of reality Where does the vision stop and the delusion begin And that's why people a lot of people call her, like, Elizabeth Holmes basically. I mean because it's a lot of fake until you make it. Yeah. Okay, you ready for corporate gossip number one? Yes. Corporate gossip one is Iron Rand alert. So Glamorous trash does dringo, and I think we should see if Telsea would care if we stole that idea for corporate gossa because I put Iron Rand in the literal free space in the middle because everybody who does fraud loves Ain Rand. Love Ion Rand Bch loved her and a festive print polyester blouse at the same time because you know we contain multitudes So I want to go back into the life of Christine Hunziger. and kind of explain how this all happened. So she goes to Princeton. She graduates in ' ninety nine, She gets various jobs in tech in New York City. And somewhere along the line, she meets another Princeton alum named Rrian O'Kelly He's a tech executive and he hires her at his enterprise software company and They start fucking. This is the light smot part of the bech tree. Yeah. This affair broke up both his marriage and her relationship. and I'm going be reading quotes from this Blomberg article. Elier, I very much I didn't look. I declined to comment on her looks. I think that's I don't want to do that. but like This is the lady you're gonna to ruin your marriage for, dude All right. Um Christine offtten told Brian that she was like Dagney Tagart Brilliant industrialist, heroine of Ain Ran's Lbertarian Bible Atlas Shrug. That's the thing I really love it when women say, you know what? I'm a lot like Daggney Taggart. Wait W give me that sentence again? The brilliant industrialist heroine. Brilliant industrialist heroine Iron Rans Iron Ran, keep going. I need to helpvertarian Bible.arian Bible Alas shrugged. I said, oo, That really gets me going. Well, she really, I mean, but that's the thing. You would never that's that's a to me, that's like a red flag for a fraudster, right? And if you don't like I anyone who Let's say, I'm going to give you because I'm likeike an understanding, nice Uh, you know, kind person, I want to say. I'll give you till seventeen to be very much into Ironrnd twenty one. I'm not gonna to be that kind of generous No at that point, you shouldn't understand someone whose whole thing is like, greed is good and you should be a greedy asshole. Like I'll give you your teenage years or then yeah She would say, this is Brian. Rrian's quote, She would say it's all of our job to be selfish. and if you're not selfish, you're weak and you're going to be taken advantage of They get married in two thousand five two the year before that, she's employed by Brian's company called WiteMedia and they were going to sell to Yahoo, but Brian thought it was too early. The board ends up firing him and they do sell to Yahoo for eight hundred fifty million dollars Brian said Christine had a hand in forcing him out of the company as their marriage was falling apart A representative for Christine says in a statement, It's obvious that Christine's ex husband has a weird ater grind over his exit from right media and has told different stories about his departure. He will blame anything and anyone for it regardless of the truth I'm just gonna say, I'm gonna give this one a big. I don't care. I don't care. If If you marry someone who's like my whole deal is being selfish and I will do whatever it takes to win and fuck everybody else. If you get fucked by that person, like it's true. Sorry, dude. I know. Sorry you ruined your first marriage to marry this lady who told you mash of red flags waving in your face. I'm selfish Yeah Wh you say I can fix her what do you say? I could fix her. I kind of like that Brian, if you're worried about Brian Donby, he sold a company in twenty eighteen to AT and T for one point six billion dollars. Good for you, Brian He describes his ex wife as cunning with little regard for ethical boundaries. quuote, I still can't understand what the hell I was thinking or how that happened. That's what he says about his marriage.ote, A some level, she takes pleasure from seeing her power and what she can get away with And it sounds like Brian's into that a little bit. Sounds like Brian's gota little pink At Yahoo, Christine starts this company with other coworkers, including that former CEO from Wite media, a guy named JP Singh. a computer he's a computer science professor from Princeton and another guy, George Goldenberg who's a Stanford engineer And from here on out, I'm just going to call them the lackeies because they kind of are her little crew go with her to every company. And at least according to two civil lawsuits that I'll link in the show notes, were're complicit in all of this fraud Allegedly So we got a software salesperson, a computer science professor, a vice president of engineering Together, they start a plus size clothing rental company called Guinnie B, okay She says she started it because most retailers didn't make clothes for plus size women despite the fact that that size represents the majority of Americans. Listen, I spoke to one of my best friends who's plus size and she says the biggest issue for plus X clothing isn't finding clothes that fit It's finding clothes that fit that also aren't covered in insane patterns and are just ugly. This is I quoted her. The prints are crazy. everyt The prints are crazy. Every shirt has a cold shoulder and they all look like tense or mother of the bride. That's so c. L why? I know. So Robbie, based on that description, can you show me what you're seeing here in this image? This is from a CBS morning interview with Christine This is her in front of her warehouse. Yeah, okay. so we got a bunch of racks of clothes and they all look like a L something you would put a doll in potentially if like, you know, you're four years old and don't have any type of taste in anything. orr like yeah,'s a bit of a Jackson Pllock ish vibe to it and then something like maybe a lot of stuff like Dorothy would choose in Wizard Oz as well Hideous prince, heinous heinous colors like A lot of hounds tooth for some reason. I mean, it's just like this is not solving any problems, right? Like I wouldn't want to buy those clothes let alone rent them. right And what would Christine know about fashion? A former employee said, quote, Christine was the antithesist, like as a person, the antithesis of fashion. It would be shocking for her to start pitching a fashion business at all, period You know, it's just daunting me right now that we should really be trying to sell ads for Devilwars Prada too right in this because this is the we know a famous story of someone who is the antithesis of fashion. You're so right. came into this place and what withith just a little bit of guidance. And a super hot face. And a super hot face and body You can do it too too can get hit on by a magazine guy in Paris? I don't quite know. I watch it in chunks as Casey watches it seemingly daily She had This is Christine back to Christine, not Anne Hathaway. She had mousy shoulder length soccer mom hair and often dressed in ineoffensive suburban office park uniform of blouses and trays trous. She wore flip flops held together by duct tape, and those close to her would beg her to look more professional for the sake of the company's image Flip flops, flops held together by duct tapeess so you're like some fucking Princon billionaire left his wife for you and your're duct taped together flip flops. But I think it's because she thought this company was a tech company. She didn't understand. And like that's very in Silicon Valley, like that's the way to do it. Like, I'm bootstrapping, I'm wearing,. I look disgusting. The more disgusting you look As a tech company person who's trying to raise money from other tech company billionaires, the more they think you're The more they think they're like, wow, you're really willing to put all your money into this and don't you don't even want to buy new flip flops. Yeah Yeah, okay. I get that. That makes sense. Remember how much they live foot feet Bare feet In an interview with CBS in twenty sixteen, she said that Despite her knowledge of a woman's wardrobe Christinea is the first to tell you she's never been interested in fashion And she basically says that she got into this from a business perspective. She's like, you know, seventy five percent of the adult female population is size ten or above And traditional retail ignores them, right? But then that's interesting because two months after that, I found that she told CNBC, quote, The idea for her company called Quinnie B was spawned in part by her fond memories of sharing garments with her cousin as a child That's so Elizabeth Holes. She did the same thing. She was like Five years into starting this company, she started this new story about how her uncle died. and that's why she wanted to Shes just like, yeah, let me just give me a new version of this. Let's whatever I'm selling isn't working. And of course it's not when you're like you know, I think a lot of maybe career people giving you career advice, they might sell you on like do what you love and you never have to work a day. So it's pretty hard to pitch the story of like I actually don't care about this. What I saw was a hole in the marketplace that I could monetize. But again, No one No one's talking to anybody plus size. No one's asking any questions. No one's looking at those clothes and be like, damn are ugly Um People are just writing checks from Bill Ackman, and also a woman named Monica Graham, a former hedge fund manager who wrote Christine Checks for Millions of dollars. Graham then asked her out, and the two dated for a time They do parties at Monica's house, which is Insane. I looked it up. I found a write up on the house from the East Hampton star. Here's oh wait, hereere's a picture of the house Let me know if that reminds you of any houses that we've seen before. Oh Larellis encoded. Yeah Very Japanese white person into Japanese stuff. Yeah Mrs. Graham for the House said that she interviewed fourteen architects. The house includes a multi level water garden, a rivulette Do you know what that is I do. What do you pour? You don't think I know what a rivulette is? do you know? No, I have no ide. Koi ponds and small waterfalls, a formal enclosed garden with a fountain, woodland gardens. The gym has a first class equipment, a Flat screen TV, and the pool has a pair of underwater treadmills. Underwater treadmills Do you think they're like treadmills enclosed by I don't know what that means. It feels like a way that you would like punish your subordinates It's like waterboarding where you have to run as well But tell you who liked it. Clints because from this house, it's super easy to raise money for Guinne B from the wealthy Hamptons crowd She even meets the Clintons in january twenty sixteen. There there they are together Always alwaysways ready to pose with some fraudsters for a photo opop. Now, if you're somewhere way west of East Hampton though going down the highway unt you hit Long Island City because that's where the company's headquarters. whereere I used to live. Right, right. yourre old neighbor All the employees working at the Long Island City headquarters are like, huh This woman is raising money based on the fact that the company is doing well. Like look at all this press. She's a Forbes top one hundred female fucking retail lady. But as one employee said to Christine during an All hands, quote, everyone feels like the company is doing very poorly. People know, and people are scared. Employees could not get a straight answer about the finances and felt like Christine was shifty every time the subject would come. this was said at an All hands. Yes So again, all of those executives from earlier who were like, we had no idea. No one even made us brought the st our attention at all like all hands meetings, employees are like, something is not right here. Yeah. ye. I always tell my friends who go to work for startups especially Find out about the finances Not how much money they raise becauseuse I've asked this question before, and they'll be like, well, they just raised sev five million dollars. Okay That's financing. Can they make money on their own? Yeah? What's arere they making any profit whatsoever? You don't have to know much. It's literally just, do they make more money than they spend or are they dependent on financing to pay bills? Be that's a completely different situation. Um I feel like you gave me the opposite adice I joined this podcast. Oh, we're like, donon't look into the. Don't worry about it. Don't look into the finances. It's fine. Everything's fine. Everything's good You're like I got thirty percent of zero. I found so and then what's the vibe at the Guin Be headquarters? I found this video from the Guinne Be YouTube account, which is still up, and this poor social media manager is trying to do a Facebook live with Christine to talk about the business. And I think it just gives you a really good idea of the vibes at the time I am Lisa. I am your host I amm also a twenty B member and I've been an employee for quite some time now Joined by our fe leader and CEO, Christine Huicker. I Facebook, Yay, thank you for joining us. Thank you for coming I just walk down stairs, but let's make it formal. As make it seem formal. I we've got a whole setup. We might as well make it formal. Let's do it. Okay, so so our first question and I'm really excited about this, what do you think is unique about plus size fashion I probably should have been prepped with the pre seited questions beforehand So what do I think is unique about pl size fashion? I would say for me, the uniqueness is not around You've got to cut the clothing differently or you know you you have to make styles differently or these different shapes. I think that's unique about plus size fashion is just simply how ignored it is and how underserved the market is. I have a lot of thoughts about what I would just watch. First of all, this is just kind of an aside, but I would say one of my biggest pet peeves when I worked in the corporate world, one of the things I hate the most that's still like Hearing it in that video like made the Hirs on the back my next name is whenever the CEO or your little boss is described as your fearless leader, like I get that it's like this like kind of semi sarcastic thing, but like it started that way and it's now just become a thing people all say. likeike this is our fearless Well, don't you remember Halmer Lucky said the bravest thing you can do is start going.. I guess that's true. And he would have loved her mask her duct taped flip flops for sure A I So I hate that, but just like What I saw is someone who you know, we'll say as a performer is like I'm watching someone try their best to make a thing light and fun. The poor social media managers giving it her all. Yes. and then I'm watching this dark cloud of energy just shoot down everything she's like she's really making this girl work like five times harder than. Thank you for joining us. So I get it. you want to project that like I'm here at work, but like there's a fun way to do that. And like, oh, so we're preceding the questions. So you're like now you're undercutting the whole like concept of the event. and then the very first questions, you're like, I should have been prepped on this. and it's also like What's unique about your business? Yes This is the thing that pisses me off because if you know anything about plus size fashion, you know, there are complaints about like One of the things that people hate is that they'll just take a regular shirt and just make it bigger. And like that doesn't always work on people. So when she says stuff, like it doesn't not what's interesting to me is not that it needs to be cut differently or all this stuff. And probably if you were a customer watching, you'd be like but it doesn does need cut differently. And then what does she say? The most interesting part about this business is that there's a hole in the market. The most interesting thing is that I can make money off of her The most interesting thing is I can profit from it. And then when she says, I should have been prepped about the most like unique thing about the business that I'm in. Like imagine it's the eighteen fifties and you ask fucking Levi Strauss, what's the most interesting thing about Denim? And he goes, U Fuck, let me think. He's like. Obviously she doesn't have a passion for fashion But she has a passion for Asun. Okay. I don't know where this is going, but I like it. Asvice As a service shun So like clearly, her heart's not in this. and in twenty eighteen, she pivots from Grinny be shitty clothing rental company with no customers to castle We' a company that builds websites and runs logistics for other clothing rental companies with no customers. H, We failed at this. Now'll help you fail at this. Yeah. And that's when Castle is born. And by the way, she says that was always the plan all along.. She's like we did Quinniebeie specifically, so I would know.Quinnie was a liive. I knew in twenty eleven that as a service was going to be a thing. The whole time I was trying to get that sweet sweet An Taylor looft money And I knew I had to make Guinie B. to nail down Anne Taylor as a client All right, ready for corporate gosm number two Corporate goip number two is, if you thought these rich num nuts were gonna go crazy writing checks for a company that offers fractional ownership of stretchy tops with built in necklaces, just wait until the words entnerprise software hit the inside of their dumb little brains Y. All right, here's a great quote from Bloomberg Investors in Castle manyany of whom knew little about fashion or retail, couldn't get enough of Christine, who had tech bonafites and knew just how to deploy industry jargon and dangle enviable financial productions Two things happen around this time in twenty eighteen First, Christine gets brain damage Right before the rebrand, quote, while trying to take a bathroom mirror down, it popped off and hit her on the top of the head She told coworkers that she'd start to experience short term memory loss, even asking an employee to follow her around the office and take notes at her meetings so she'd be able to reference what she had said. and then in the Devil wears Prada, category of things that happens, she gets a complete makeover. Oh, the old brain damaged makeover So this is her now. Maybe you can describe what you saw earlier in this episode to now. Sure. So at the beginning of this episode, what we saw was a What would we call that look kind of like a Suburban woman who does not have plans to go outside ever. kind of like just like you're kind of regular like Mom, M. Yeah, lady, you know, just trying her best to get the kids to school on time And now what we see is like a Chic biker lady. She's kind of giving okay, here's a here's this one's not for you, Michael, I'm sorry. She's giving Chade Diaz Y Diaz whatever happppily ever that whatever the after Sexon City was and just like that Yeah she looks exactly likeot. It's shaved down on the side. She's got a Bold red lip, ye. bkerack And the shadow in that picture looks like a man I would like to I'd be scared to walk past in a dark alley. It literally looks like Kenki from Greeace. Yes So she marries again, a woman named Pheddra Knight, who's a former rugby player for the US National Women's team. They live in a newly renovated six thousand five hundred square foot complex with a kit pond and an indoor spa. So look, I think there's a few like we were kind of talking like Bingo Card or whatever. like so if these elements show up a lot in your life You're you're a fraudser, one of them, the Clintons. If you got if you're in a picture with the Clintons I've got questions. If you own or we into ki fish a ki pond I got questions.. If you were ever listed on a Forbes, any list I got questions. You got three of those things together I got two more. Yeah, o, please Diane Von Furstenberg or Barry Diller. Great. and Ane Rand. Oh, yes. These are all like she's got all and I don't know, well, she's doing fashion, so I imagine at some point, Diane Von Furstenberg. She she loves rap dress. Yes,eses. Act actuallyually, let's just expand that. notot just Diane Furstenberg, just a rarap dress Um And everything's coming up, Christine at this point. She's bringing in new clients, American Eagle, New York and Company, Vice and Taylor And she's debuting her new look on CNBC. This is in twenty eighteen. when she's asked standard CNBC question. and the question is, what can your business tell us about the state of the American consumer? Your volumes must tell you something about the health of the American consumer Again, I think you have to get statistically significant in order to really make a comment on the health of the American consumer. What we're seeing is we're seeing people sign up for the services. We're seeing retention be very strong. so there's not wage pressure. But I think like Jan said, you're seeing record wage growth. I don't know, I have no sal I My sales aren't stysically significant. I need to see numbers to get that, but I will say a mirror fell on my head. If that means anything to you guys. And now her hair is pink by the way. It' way taller Yeah and the sides are way shorter. But it does feel like a bit of a like a comedy bit now where every video I see of her, she's just like, Her hair like she's she's becoming a Marge Simpson And it's like it's like a bit every video hair just gets a little bit taller and more ridiculous And employees are watching that CNBC being like, you guys, she just said it. She has no clients. She doesn't know because she doesn't have statistically signific. You can't even fucking make something up I don't know. Yeahah, I don have to get statistically significant and I can't really tell based on five. Other stuff is seasonal, but this is not seasonal. Is that what you asked Some Castle then employees from Blueberg say that they had their doubts at this time. Why they whispered wasn't their chief executive officer sharing basic financials Right, guys, if they don't share it, then that's a question. It's like not it's not even a suspicion at that point. It's like if they're not doing that, then the whole thing you know instantly It's not like, I have some suspicions here. likeike we know And people question themselves so much, Well, they must know better than I. They went to Princeton Three of them And Sanford If the company was doing so well, why didn't they have access to the numbers? Why haven't sales improved? Why were the warehouses half bare?Qote, I did not see how they were going to make money, said one former executive They were constantly changing the business model, right? Like first it was clothing rental. now it's enterprise as a software. now it', you know Qote, onene investor said that they noticed the financials ine shared in an Excel spresheet looked like something thrown together in a high school computer lab, not one created by a sophisticated multimillion dollar company Like I think the secret to this, if I were to run this type of business is a I just Here's what you do. Okay, okay. Where they're fucking up here It's this warehouse. It's the send backacksent to the washing, the dry cleaning. What you need is to get the person who rented it to just send it to the next person who rented it Yeah, and then you wash it yourself, you know, and then you send it to the next person. You're mailing it twice. you're steaming it. I don't know what you're doing. Just one person sends it to the next person. What I love about this business model is dry cleaning famously is super cheap Exactly, Right. So skip that part. Have you ever seen it because the sisterhood of the traveling pants? Of course. I haven't. But what I assume happens is four girls wear the same pair of pants at some point. Yeah. That's the business model. Right. There's no warehouse. This sisterhood isn't sending these pants back to some warehouse to be then sent right back to. I'm a middleman Yes yes. So all you do you pay me for the shirt. And then you just drop it in the mail for the next person. I mean, it's really crazy because it's like, even rent the runway, we talked about the fact that they have not made any money so they've maybe had like one or two Um profitable quarters because this business is so difficult to run. It's so expensive By the way, I pulled up Rnt the Run Rise stock price and you'll see like they IPoded in twenty twenty two at a three hundred dollars share price. Yeah sucks to suck if you bought that at twenty twenty two because it's now worth five dollars. This chart I'm saying is the opposite of Christine's hair. It's just it's starting very high and red and just going down and down and down and down until it's at ground level But do you notice that little blip around twenty twenty four and a half? I do see a little blip there, ye. That's so interesting. That happened because rent the runway this is This is a headline from Forbes Rent the runway goes from penny stock to quadrupling share prices in days after doubling down on AI H God. What a nice, what a lovely lifeline for these companies. You can't spell Forbes without For BS, by the way. It's just a publication. It's just for BS. Here we go Um And now you'll notice after that AI, people are like, oh wait this AI isn't doing anything little blip. Is there a crypto blip in there? U notot that I know of I would look, I will say because I told you, Casey, my wife she's newly and I was we were like looking at outfits on there together ' you should go on vacation. it's the websites themselves are very funny because it's like you pick the thing you want to rent. It's a model wearing it. she looks beautiful in the lighting and this. But then other people who rented it also they like upload their So you can see what it looks like on other people. and it's the worst idea I've ever seen. Oh, really? Wells just it's a model with a photo shoot And then it's just some like lady at her niece's confirmation like this is what I look like in it. And you're like, why would you post that under that? E A you crazy. But so Newly actually really works because it's only American it's owned by urban outfitters And it's anthropology, urban outfitters and then one other brand that I'm blinking on. And because they own everything, they're actually doing very well. They're profitable. Okay. becausecause they're not having rent the runway is buying these clothes in the first place. So back to Castle, they're not making any money. Even if people wanted to rent everyday clothes from mall brands it would still be difficult for them to make money, but still They're getting money from financing. So they're expanding more money into distribution, dry cleaning, technology, logistics this was all about to come crashing down She was about to face the facts In twenty nineteen, Christine's finance division sends her an an income statement. all the numbers from the previous fiscal year Castle was losing forty seven million dollars a year with twenty three million dollars in revenue So we ready for corporate goss number three? I am ready Rperrom number three is. so this is the part where I stopped the VHS tape 'cause we're all in class and you're sitting your chair and I take out my overhead projector and a transparency with the fraud triangle on it. And I whip out my felt tip pen, I click my thumb, wipe it off from the last class. I take out my felt tip pen and I write the following on the fraud triangle, okay Remember the three elements? Do you remember them? Yes, I do. was. opportunity. Y. rationalization And wait, I'll get the third an opportunity rationalization and no, I can't get the third Pressure Pressure. Yes So okay Let's start with pressure Christine had always already told hundredundreds of investors that this company is doing well, and she has bills to pay, notot only for dry cleaning vendors and warehouse landlords, but also for Ki pond, maintenance guy. Gotta maintain the KuiPnd. And she's not making money, right? The business is losing money. so she needs to make money through financing, and that's only possible if investors think this company is doing well. They're db They're not going to give money to a money losing company Okay. rationalization This business is a good idea Everyone on CNBC says so. her investors say so. The board says so. I mean, we could even like look at it and say it's a good idea. Coyfish say so Sure If she can keep this going Another year certainly Maybe they'll be bought or they'll go public and everyone can cash out and she can kind of walk away from this Now let's go to opportunity The income statement the finance department gave her It's in a word document. Oh I think I know what the opportunity' gonna be. I wonder if I could just backspace backspace backackspace zero zero zero seven. It's then that the SEC alleges that Christine quote icked up a new income statement, one that cut her losses to twenty four million, and tripled revenue to seventy two millionars, and sent the fake document to at least ten other investors And then another one In april twenty twenty, the next year, showing ninety million dollars in revenue and very little losses And now growth. If I was an investor, I would love to see that. We saw that hockey stick growth. It's craz So now Castle has an auditor because they're getting ready to go public and the auditor is BDO and An investor says, can I get the audit? She's like, no you can't, it's delayed because we're just not really high up on the auditor's priority list That's not how that works. You know how it is with these auditors. This guy is busy. I mean, he's got kids, he's got a life. You think he can just come in here and audit my company? According to the SEC complaint what investors didn't know is that the auditor had already provided its report And it showed eighteen million dollars in revenue and thirty two million dollars in operating losses But the investor didn't let up Can we see the report, pase She told her finance team to send her the audit report that had already been published. In ad dock please please an a wor doc. Do not send me a PDF. send me ad doc In a draft of it and word. I was joking Be I said this is such a basic fraud. It's a basic fraud for a basic bitch Princon. She bumped up the numbers and removed the auditors's warning that the company was at risk of folding, then added the word draft, saved it as a PDF, and sent it to her investors. The document boasted Castle's best numbers yet Now one hundred twenty million dollars., they're doing amazing on paper and went out to at least eight investors And then she sent another version to more than a dozen She appended an auditor signature copy paste into the doctor's report. You gotta look, I got to tell you, if you're running a company If you're an optimist, you're going want to use you're going to want to use Microsoft Word. And if you're a pessimist, you're gonna be an addobbe person. Me, I'm an optimist. I love word. I love to be able to just I don't know, I like to just put what I feel on the paget. I't Canva. and then I just make it like pretty, you know? like I make it like themed Much money, rich. suuccess So prosecutors allege at this time, Christine went on Google, conducted internet searches for fraud created audit firm fake and JP Morgan four million records fake. And that one, listeners will know, that's in reference to Queen Charlie, who was currently under indictment for a a fraud against JP Morgan.. And obviously she saw herself in that. And it's funny because Charlie also was evidence in her trial because I watched that whole trial was Google searches that she did for Elizabeth Homes. Yeah Um Meanwhile, partners are abandoning shit because they're like, this isn't working. L we're not making any money out of this. The business model doesn't work. So Ralph Lauren, Bloomingdalees, Banana Republic, Express, they all dropped their business with Castle. and now she's really freaking out At this point, a bookkeeper who handles the personal investments for Henry Kravis, he's the guy from KKR. He looks at the audit report and he's like, Well, this doesn't seem right Um He calls BDO and BDO tells them that they haven't been working with Castle in years. So the bookkeeper calls Castle's boards Castle's board, including the Lackeys, sing in Goldberg and tells them what's up. According to core documents, Christine told Kravis that she'd mistakenly sent him a marked up version of the report that she was going to use for a lecture she was giving at Princeton on ethics On fraud. O ethics Yeah Kravis didn't any further and cash out their shares So So it's like, they know. So it's like got it, we know, we're not going Let's just get our money out of here quietly and then you can keep doing your fraud In september twenty twenty four Christine doubles Castsel's revenue again Doubles. I mean, she is an amazing businesswoman at Microsoft Word. You give this woman Microsoft Word and there's almost nothing she can't do Now she says she has a cash balance of one hundred thirteen million do But the real situation was that she had a million dollars in cash sixteen million dollars in revenue She's really sloppy right now. She prepared a messy report that was missing a page and contains notes that were out of date. so anybody the time to read this would realize like this is there's something wrong. Finally, because of that report from the whistleblower. She gets fired as chairman of the Bard of Castle. she's still allowed to sayay on a CEO But thing is like, I'll be Chairman of the board now We'll do an investigation on you Mhm No one tells investors about the investigation, the board shakeup, or the alleged fraud The board members, including Singh and Goldberg cash out their shares worth up to nine million dollars alwaysways win By the way, cashing out their shares means that somebody else is buying They defrauded someone. Yes. It means they defrauded someone Also, This is where it's like She had to plead guilty because it's like this stuff is just, it's just so beyond. Yeah. They had the company purchase a two million dollars insurance policy effective december eighteenth. to protect directors and officers from fiduciary personal losses if they were sued Meanwhile Christine is still raising money, and she even tries to start another company called P one hundred eighty. which was basasically a company that she started with another retail executive who's now suing her. where they buy stakes in existing retail vents businesses and then with that ownership stake, have them use Castle. So she bought steak in the clothing retailer Vince, which you might have heard of, and then Vince would in turn use Castle. She's like, I heard about this circular accounting thing. Y. Is that something we can get going? Y I can buy us some clients. Yeah From the SEC, this is from the charging documents, which I'll link in the show notes in or about february twenty twenty five Christine attempted to sell an additional nineteen million dollars of her c castle shares to Investor onene. After meeting with Investor One to discuss the transaction, Christine conducted an internet search for bank fraud versus wire fraud severity The following week, law enforcement agents approached Christine and seized her electronic devices. Even after being confronted by law enforcement, Christine continued to meet with Investor One to discuss the fake audit, never revealing that the audit was fabricated or that she had been removed from the board and was prohibited from taking any actions on behalf of Castle Four months later, she's indicted on charges including fraud, aggravated identity theft, and making false statements. The U.S attorney in the case, Jay Clayton said that, quote, as alleged, Christine Hunsinker defrauded investors of hundreds of millions of dollars through document forgery fabricated audits and material misrepresentation misrepresentations about her company's financial condition, The promise of pre IPO technology companies can be fertile ground for fraudsters who play on investor euphoria. Euphoria is doing a lot of work because these are very sophisticated investors, but Side note, on this U. S. attorney, he was also the SEC chair during the first Trump administration and justust two months ago in february twenty twenty six Clayton announced a new initiative where companies can avoid criminal charges if they self report fraud. I mean like what does that even mean what does that mean So if you come forward and say we did I defrauded these people, I would like to not go to prison, but I would like to keep a lot of the money, is that okay? Basically it's going what I'm guessing is The SEC is so this is just conucture SEC has so little resources that they're like, can you guys just let us know? Tell us and then we're kind of, we'll be super cool about it Anyway Just about two months ago, march fourth, twenty twenty six, the Data Analytics P playboy thirty three birthday, thirty third birthday, by the way Christine Huzigger played Ped guilty to fraud. I think that's smart. I downloaded the transcript of the courtroom when she did plead guilty. So according to this transcript for her pleading guilty in the courtroom was her wife, Phader Knight and ex girlfriend and investor Martha Graham Were they I assume sitting on different sides of the aisle? I don't know. That's a good question. They don't say they don' they don't like the courtroom reporters don't paint a picture like that. Okay. ye h But, oh, sorry, did I say Martha Grham? I meant Monic Grham. I was thinking dancing. Do courts do that like weddings where you're like people sitting for the like defendant against. But like in certain cases so for like the SBF trial or even the Charlie JVes trial, there are so many more reporters and people who are on the side of the victims that basically the way it works is like the first couple rows are the immediate family. of each side. And then once you get towards the back, it kind of like creates an L shape where you have all the reporters on one side and then it's just overflow. Got it. But it does it is like that. yeah Anyway, so here this is from the transcript Monica Graham an investor in Castle is here this is the lawyers telling the judge who's there. Monica Graham, an investor in Castle, a friend and her current employer is here and four members of gamblers anonymous who have gotten to know Miss Hunicker, including two called to so called GA old timers So maybe she's saying at this point like I have a problemic gambling. Yeah. yeah Um Okay, so I'm gonna to read you the transcript of the guilty plea The defendant, beginning in or about february twenty nineteen, as the founder and CEO of Castle, I knowingly provided false documents about Castle's finances to the prospective and current investors I sent them false statements with the intent to promote the sale of shares, options, and warrants of Castle, the judge. And did you know at the time that what you were doing was illegal? The defendant, Yes That's where we stand now. And like I said, sentencing is going to be on Oober or on August fifth. Are there any hints as to what sentencing might be U to twenty years But and I'll tell you, people who have been watching this podcast for a long time know I'm so bad at predicting court outcomes and sentencing. So I would guess, this is my guess I'm gonna to get seven years You know, I can't wage your guess. I don't know. but I will say like to me, if you are defra, if you're like a Ty Lopez, right and you're like selling dummies online, like Give me your the three hundred thousand you've saved up your whole life. like, I hope you die in prison. And if you are whatever this lady is and like you're taking money from Bill Ackman and Peter Theal, like I genuinely don't care. You know? So that's a really good point, Robbie, And that was one of my takeaways, which is that's actually the opposite of how the justice system works right now. because you can take money from Hylope has does and has take money from A construction worker who saves three hundred thousand dollars. That's everything they've ever had in their life. But what you can't do is defraud Jamie Diamond, like Charlie Devist did. What you can't do is defraud Bill Ackman. That's one of the reons why Eizabeth Hmes got in so much trouble because she defrauded very H. prof power people powerful people. And that is the law that we live under right now. becausecause what I would say and what I say about Charlie Jeavise is the enemy of my enemy is my friend. And like her fraud was very obvious. And as you know, you could go back and listen to the many episodes we did on that fraud, But anybody should have known. simimilar to this. You should have known, Bill Ackman anybody with a brain and who can ask two questions, same with the Charlie Javis trial. It was like if anybody ask anybody who was using the service or would be a customer of this service that supposedly in Charlie Javis's case had four million subscribers or in ristine Hunsiger's case had eight hundred million dollars worth of subscribers If you would ask ten people on the street, have you heard of this If you would lower yourself to talk about such things with the unwashed masses, you would find the truth. You would sa yourself a lot of money. Yeah. Um And I think that's ultimately my takeaway is what you just said is This is just another reinforcement. I dont you know, a lot of people would say, oh, well, she's a woman. and I don't I don't I genuinely don't think that's it I think it's more just the level of people these women defraud. Now the interesting thing to me and we saw this in the Charlie Javise case and the Elizabeth Holmes case is you have young, now this isn't necessarily the case with Christine Huziger, but you have really young pretty women CEO's who are able to very easily get money out of these. have to take a swipe and home sing her that way. She wasn't as young as Charlie Davis. I mean, Charlie Davis and Elizabeth H are in their twenties Elizabeth Holmes was able to get money from George Schultz. from all of these very powerful men. And I think that was more interesting to me, less so that they got in trouble because they were women, because but that there was a I think there was an element of Oh, look at this pretty woman, and I want to get close to her and I'm going to give her money which I think is is bad on both sides. Sure, Yeahah. and as classic as. Yeah. Yeah. The other element here is, of course, corporate governance. likeike that is one of, you know, you think about corporate governance and you're like, that's just a boring thing I don't really need to think about. That is how you protect yourself from fraud If you have a board of directors who can look at you as a CEO, Critically And they're not your friends, which so many of the biggest companies Anytime you see a company with a CEO with a massive pay package who basically gets to with impunity, you can bet your bottom dollar that he's got old college friends on the board. whichich is not governance money transfer they get paid two hundred thousand dollars to tell you, keep it up, buddy, you're doing great. It's also like realistically that is the reason to go to Princeton or whatever. Like yes, you're not getting a better education there. You're not like what you're doing is meeting someone who's likely to be some fraudulent CEO or even a real CEO that you can just latch on to for life say, Well, they're prrinccedon educated U compomputer science guy. Well, what the fuck does he know about fashion?? Any other takeaways from this episode? I I have one takeaway.. It's a cartoon idea. Okay that for anyone listening, if you want to make this Just all I need is is like a one like maybe just give me a credit, a producer credit is a It's like a Pixar movie where it's like a rescue farm for koi fish that have been repossessed from fraudsters, you know? Yeah. all these people, when they lose it all when they go to jail, those ki fish have to go somewhere. You're so right. I'd like to see those ki fish kind of like discuss the different types of fraud backgrounds they were at We could start like a ki fish sanctuary. Ki fish retrieve Yeahah, we go retrieve the ki fish and we have a sanctuary for them And we promise to never They don't have to be around scams anymore I really like that. All right. if you want to if you want to donate to Beck and Robby's C Sanctuary rescue. But wet we don't rescue Cyfish from like objectively bad things. It's just like bad people. For bad people, yeah If you want more corporate gossip in your life, you can join us over on Patreon at patreon dot com slash corporate gossip For the low low price of five dollars a month, you get two extra episodes of corporate gossip every month. Last week we did genuinely one of my favorite patreons of all time. The one about the longevity longevity that Yeah. I was actually like we were giggling. Oh my God. It was like the giggles to the the ext that I've never experienced before on this podcast. as you can get that. And then if you join at the Murdox Mates level, that's a ten dollar a month level, or you get group chats and you also get to come to the quarterly book club. And then of course, if you want to join at the SBF Sugar Daddyies level, you get a shout out on every main feeed episode, which I'm about to do right now So I'm gonna start from the bottom up. That Shout out to Michael Anderson, Sarah Berttis, Anastasia B, Nora, Kelly Jade, Sarah Gilber, and Sarah Armstrong. Thank you all so much for your support. And whether you support us on Patreon or you're just a listener, we love you so much and we just are so happy that you spent another hour in change with us today If you want to leave us a review, that wouldd be nice too That would be nice It genuinely does help people find our podcast because for some reason, the reviews are the things that push you up on the charts. I don't know why that is. No one's ever explained it to me. We don't get the algorithmic blackmagic, but yeah, reviews. And if you happen to be doing this on YouTube, like a comment and a thumbs up would be nice to.. We also have our weekly Cgnitive sururrender, which is our weekly news roundup on YouTube that goes out on Fridays. If you just want to like a quick funny roundup of the week news of the week, go check us out over there. We're trying to grow our YouTube a little bit so that there's even more content over there. So you really should not ever run out of places to watch us. you guys should know that in any word doc we are We're doing so well. We are flush with cash Unfortunately, we work in PDFs here. We need to grow the YouTube is what we're finding out All right, well, thank you guys so much. I hope you have a wonderful weekend and we'll talk to you soon. Bye. Bye I have our good news story here from Elizabeth Lou. I know you've been used to hearing her voice and loving hearing directly from her, but she just finished her semester at the Ohio State University. So congratulations to Elizabeth. So for the time being, until she goes back to school, I will be reading the good newews reports from Elizabeth This one comes from Newton, Massachusetts, where public libraries have been a lifeline for immigrant communities. About a quarter of the city's population is foreign born, and the Newton Free library has allowed them to feel connected to their homelands and build community. The library includes almost an entire floor dedicated to foreign language titles, as well as programs including ESL or English as a secondcond language classes and citizenship courses. Newton's collections of titles have also evolved to match the city's evolving population A few years ago, Newton's Korean community went door to door asking families for book donations to establish a collection of Korean texts at the library Ever since then, Helen Pachenko, the manager of the Foreign Languages Collection, has been building on their campaign to include a wider variety of foreign language texts Across Massachusetts in cities like Greenfield, Cambridge, and Quincy, libraries have been working with colleagues to find new ways to meet the community's needs and grow their collections. In twenty twenty three, Greenfield Library expanded its collection of books in French, Spanish, and Haitian Cole. Similarly, Maria McCauly, director of the Cambridge Public Library, said that the drive to include everybody in the community serves the larger purpose of advancing American democracy She says, ourur democracy is strongest when there is a diversity of both free thought as well as of people. and our libraries want to support that. Olivia Mello is the director of Casad D Sede's Library in New Bedford and is a testament to the power of public libraries. She relied on the library's Portuguese selection as a nine year old when her family moved to the area and did not have money to purchase books Her experience encouraged her to fight for libraries and the impact that they can have on immigrant communities. She wanted to become a librarian to help people understand that libraries are very valuable to the community and helping people grow and learn and educate themselves. And it all started with walking into the library and checking out a book. There are several ways you can support your local library. First, you can use your library card. The more you use it, the more you contribute to attendance numbers. The higher attendance numbers allow branches to justify their budgets and provide new programs and purchase new books Many libraries also have friends of the library organizations that you can join that run book sales, volunteer programs, and raise private funds Or you can donate directly to your library and continue to advocate for continued budget by contacting your local representatives