Dressed for Failure (Part 2) What AOC’s Ethics Violation Can Teach You

In Part One of this series, we explored how the investigation into Representative Alexandria Ocasio-Cortez’s appearance at the 2021 Met Gala unfolded, and what it revealed about the burdens, inconsistencies, and reputational risks of regulatory reviews. While the ultimate outcome was limited to additional payments, the years-long process underscored the steep costs of even minor compliance missteps.

In this second part, we shift focus from the investigation itself to the underlying dynamics that created risk in the first place. These lessons highlight how conflicting interests, unclear controls, weak oversight, and poor recordkeeping can compound exposure – and how organizations can avoid similar pitfalls.

Forced marriages and conflicting interests carry additional danger

While Ocasio-Cortez wanted to minimize costs, her designer had a competing incentive to maximize visibility. Since the value of that publicity would far outweigh the cost of any labor or materials, the Ethics Committee concluded that the Congresswoman should have known her designer might ignore instructions about cost control:

“Given the inherent value gained from the exposure of a sitting congresswoman wearing their designs to the Met Gala,” the report said, “it is not surprising that [the designer] did not seek the congresswoman’s ‘authorization’ for the gift they provided.”

The simple way to manage this conflict would have been to use an off-the-rack dress, or pick a different designer. But at the tightly controlled Met Gala, organizers largely dictate who dresses whom.

For companies dealing with local set-asides or mandated partners, this scenario is a familiar one – as are the needed control elements: communication, documentation, and boundaries.

The importance of setting control parameters

This was perhaps most apparent when it came to determining the rental value of the dress. There is no simple way to gauge the rental value of a bespoke dress, especially since designers of Met Gala dresses usually provide them to celebrities for free. Nevertheless, Ocasio-Cortez’s lawyers used market data and other public information to estimate that value, and the Ethics Committee ultimately endorsed that approach. But a key portion of that approach depends on the actual cost of making that dress, and there appeared to be little planning for how that cost would be calculated.

The truth is that there is considerable room for interpretation in calculating the cost of a creative product. For instance, should time spent browsing websites for preliminary lookbook ideas count toward the cost of the final dress? How about a trip to a fabric store where several samples were looked at, in the context of multiple projects? What about general marketing and other overhead costs?

To get a sense of just how malleable the accounting can be, consider the movie business, where studios are notorious for finding extra “costs” for a production. When an actor’s pay is based on a percentage of net profits, even blockbusters like Forrest Gump and Return of the Jedi are somehow financial flops.

In concluding that the dress actually cost about $6,300 to make, the Ethics Committee relied on a document compiled by the dress designer’s accountant. While that document was purportedly made soon after the gala, its existence was unknown to Ocasio-Cortez, her lawyers, and even the designer’s own lawyers (who were also tasked with figuring out how much money the representative owed in connection with the apparel) until years later.

It’s not clear whether these figures are beyond dispute. Given that she faced no formal finding of wrongdoing, Ocasio-Cortez may have chosen not to challenge those numbers out of a practical desire to move on.

The need for oversight and recordkeeping

To state the obvious, lawyers are experts in the law, and not fashion industry accounting.

Hindsight suggests that Ocasio-Cortez’s lawyers should have come to a clearer understanding with the designer and her accountant as to how the cost of the dress would be managed and calculated. Perhaps even more importantly, her staff should have been made more aware of such arrangements, and effectively briefed on the importance of following them.

Instead, the investigations revealed that there were some back-and-forth exchanges between the Congresswoman’s staff and a publicist for the designer as to how to set the rental value of the dress. These exchanges did not appear to track the methodology that Ocasio-Cortez’s lawyer had devised to determine that rental figure. Coupled with delayed payments and the staffer’s dropped communications with vendors, this may have painted an unfavorable picture for the Ethics Committee’s reviewers.

Practitioners should be aware that it is often not enough to simply give risk advice – they need to help design and execute strategies for making sure that the advice gets followed, including a paper trail to document the actions. Often, this means understanding an industry or a transaction well enough to know where execution might fail, and designing proper controls to address this risk.

What could have been done instead?

In the end, Representative Ocasio-Cortez may be wishing that she had never attended the event, not just from the exhausted tone in her attorney’s letters, but also because it was poorly received by many progressives. When risky but potentially lucrative opportunities arise, organizations should not only ask whether they have properly considered the risks, but also whether they have properly measured the benefits. Ocasio-Cortez and her team could have taken some of the additional control steps mentioned above, but they may have been served even better by simply declining the invitation.

Dave Lee

FCPA Compliance Consultant