Will a wave of piracy lawsuits bring down Forever 21?

This article is from the March issue of Radar Magazine. For a risk-free issue, click here

Not too long ago, a down-market clothier could sell cheap runway knockoffs for pennies on the dollar and no one cried foul. After all, major fashion designers didn't exactly lose customers when suburban day-trippers picked up "Channel" clutches on Canal Street. But in the late '90s, cheap-chic mega-retailers like H&M, Zara, Mexx, and Topshop figured out that with breakneck turnaround and passable construction standards, they could offer affordable pieces haute enough for even the trendiest Condé Nast assistant. Best of all, aspiring Carrie Bradshaws didn't seem to care if their garments disintegrated within weeks.

She plucks young designers out of the companies she's working with. And if they're Christian and religious, she puts them in businessAt first glance, Forever 21, a clothing chain run by a devoutly religious husband-and-wife team, seems strangely out of place in this clique of cheap-chic powerhouses. Stockholm-based H&M employs 60,000 people and is run by a 12-member board of directors. Zara is the giant flagship brand for Spain's Inditex. Mexx, based in the Netherlands, is owned by Liz Claiborne. And the UK's Topshop is a division of retail giant Arcadia. Forever 21, in contrast, operates in relative obscurity from a shabby corner of Los Angeles. The company has no famous designers or ad budget, nor a single public relations flack. Yet its revenue topped $1 billion in 2006, catapulting Forever 21 into the ranks of the top 500 privately held companies in the United States. In just five years, it has quadrupled in size, crushing competitors like Rampage and Gadzooks—and is putting the squeeze on mighty retailers like the Gap. In 2001, the house that khakis built posted a $7.7 million loss, while Forever 21 boasted 64 percent growth in revenue thanks to 36 new stores sprinkled across the country.

How did an operation founded by poor Korean immigrants and headquartered in L.A.'s sweatshop district so rapidly become a player in an industry dominated by huge European conglomerates? Its founders chalk it all up to hard work and a frugal corporate culture. Others allege outright design theft. In the past year, the company has faced more than two dozen federal lawsuits for piracy, brought by labels including Anna Sui, Diane von Furstenberg, and Gwen Stefani's Harajuku Lovers, along with a raft of fabric manufacturers.

At the center of the storm are Do Won "Don" Chang and his wife, Jin Sook, the ferociously private, deeply Christian couple who founded the store 24 years ago. "In L.A.'s Korean community they're a constant topic of gossip and speculation. Everyone has a story about being screwed by them," says a local fashion player. "But you have to admire their success. People join their church just to get close to them," he adds.

The Changs, now in their fifties, emigrated from South Korea to California in 1981. According to company lore, it was while working at a gas station that year (one of his three jobs) that Don noticed the nicest cars were driven by people in the fashion industry. Shortly thereafter, the Changs put their native tongue to use making deals at local garment factories, and in 1984, they opened Fashion 21 in a low-rent area near Pasadena. From the start, the store featured the bright lights, loud music, and friendly staff that quickly became its trademark. It peddled a wide array of cheaply made skimpy clothing, carefully chosen by Mrs. Chang herself. A former hairdresser with a keen eye for salable new trends, she acted as the chief merchandiser, personally selecting fabrics and designs for the company's tailors to knock off. A hard-charging, fastidious woman, she remains obsessively hands-on with all aspects of the business, while her more retiring husband, Don, mainly attends to the company's finances.