SEVENTEEN FLOORS ABOVE WEST 38TH Street in New York City's Garment District, Seo Fashions occupies a bleak, grimy room no more than 1,000 square feet. Inside, sewing machines and ironing boards rest on metal tables arranged in tight rows. Low-hanging fluorescent lights do little to brighten the gray, graffiti-spattered walls and chilly concrete floor. On a table at the side of the room, scraps of navy blue and cream polyester provide the only splash of color. And on top of the pile sits a label meant for a blouse. "Kathie Lee," it reads in an elegant, feminine script.

Seo Fashions is quiet now, having closed its doors—at least for the moment. But just days ago, when its owners failed to bring promised back pay, it buzzed with angry employees. "Everything is dirty, the trash isn't picked up, and the two bathrooms aren't fit for pigs to use," says Lina, 32, a Mexican seamstress who worked for Seo and volunteers only her first name because she is an undocumented worker and fears deportation. "There's never any soap or toilet paper, and the plumbing doesn't always work. So imagine the smell. I showed Mr. Gifford, and he was really upset by what he saw."

Mr. Gifford, as in ABC sportscaster and former football star Frank Gifford, was, indeed, appalled. As was his wife, Kathie Lee Gifford, longtime talk show sidekick to Regis Philbin. And not just by the funky bathrooms. The two were shocked May 22 when they learned that the Seo sweatshop had been hired as a subcontractor to produce blouses for Kathie Lee's year-old signature line of apparel for Wal-Mart. Worse, Seo had cheated 25 men and women out of two to four weeks' pay after they finished a rush order for 50,000 blouses. In the glare of a dozen news cameras, Gifford hurried to the Manhattan factory the next day to see the grim conditions for himself and to hand out $300 apiece to the workers.

"We never saw the donation as a panacea for the sweatshop problem," says Kathie Lee. "Frank and I felt a moral and ethical responsibility because they were manufacturing clothing bearing my name.... These people were in dire straits, and we had to do something to help." Hoping to avoid future woes, she has also promised to create a watchdog group to search for labor infractions in all of the estimated 25 domestic and foreign plants where goods are made under her name.

Kathie Lee, 42, alternately praised as America's daytime darling and reviled as a shameless self-promoter, has taken her lumps in recent months. First she was hammered by critics who panned her CBS Christmas special ("a sickeningly saccharine vanity production that should really have been titled O Come, Let Us Adore Me," wrote The Washington Post's Tom Shales). Then she created a flap at Live with Regis & Kathie Lee when she complained about not having enough input in choosing the show's guest list and threatened to end her 10-year tenure this summer if she didn't get her way. But nothing on her entertainment or entrepreneurial résumé prepared her for an attack April 29 by the National Labor Committee, a human-rights monitoring group.

Speaking before a congressional committee three weeks before the New York City sweatshop was discovered, Charles Kernaghan, the NLC's executive director, revealed that Kathie Lee's budget line of garments—prices run from $10 for a blouse to $40 for a blazer—had once been produced by child laborers in a seamy Honduras factory called Global Fashion. "They bring the kids to work in broken-down school buses," he says. "You'd swear you're at a high school, but you're not. You're in these factories where they work 14-hour shifts."

Fans tuned in to Live with Regis & Kathie Lee on May 1 to find Kathie Lee (dressed in an ensemble from her own line) quaking with teary rage: "You can say I'm ugly, you can say I'm not talented, but when you say that I don't care about children...How dare you?" Still smarting, she says now, "When I signed on [with Wal-Mart], my overriding thought was that I had found a way to provide a continuing source of funding for...housing and care for AIDS and crack-infected babies in New York City." Tags for the Kathie Lee products promise that a share of the proceeds go to charity, and Kathie Lee donated about $1 million of her estimated $9 million profit on the Wal-Mart line last year to the Association to Benefit Children, which opened two shelters in New York City with the Giffords' help.

"I hope that one of the good things to come out of my situation will be that other celebrities who have fashion lines will take a closer look at just how their line is manufactured," says Kathie Lee, who is the only celebrity to suffer such public grief over sweatshop labor.

Kathie Lee is one of a growing number of celebs and superjocks to sign multimillion-dollar contracts with apparel manufacturers who use their marquee names to sell everything from boxer shorts to shades. Former Charlie's Angel Jaclyn Smith has lent her name to a line of sportswear that generated an estimated $200 million last year for Kmart. Model Kathy Ireland launched a line of swimwear for Kmart in 1994. Delta Burke, once of TV's Designing Women, offers up a variety of Burke plus-size originals bearing her Delta Burke Designs label. Joan Rivers has sold about $60 million worth of her jewelry line on QVC. But Kathie Lee's products have put them all to shame.

By her own reckoning, her signature clothing for Wal-Mart brought in $300 million its first year, making it one of the most successful such startups ever.

But in addition to highlighting the profitability of Kathie Lee's name, her success has unintentionally reminded consumers of the darker side of the apparel industry—sweatshops. In an era of increasingly stiff competition, in which producers here and abroad trim costs to boost profits, sweatshops are on the rise—not just in Latin America and the Far East, but right here at home. "Sweatshops are returning to America," laments U.S. Labor Secretary Robert B. Reich. "Of the 22,000 cutting and sewing shops in the garment industry here, more than half are paying substantially below minimum wage, and about one-third are subjecting their workers to serious health and safety hazards." New York City alone is said to have at least 2,000 sweatshops.

The reemergence of a problem many people associate with turn-of-the-century abuses was never more apparent than last August, when federal investigators stormed into a sewing factory in the Los Angeles suburb of El Monte. There, in a compound circled by razor wire, agents found several dozen Thai and Mexican laborers working 20-hour days for as little as a dollar an hour. Literally held captive at their sewing tables by guards, employees were threatened with rape and other violence if they tried to escape. Suni Manasurangkun, 66, who ran the shop, was later sentenced to seven years in prison for labor and human-rights violations. Her three sons received six years each, and the four were ordered to pay $4.5 million to the workers in back pay and damages. "I didn't know the law of America...that's how I happened to break the law," she told the court.

With only 800 inspectors to police the 22,000 garment contractors and 6 million American workplaces, Reich has sought ways to promote self-policing. He announced in March that he hoped to place ads in 10,000 publications urging consumers to ask retailers whether their clothes are made in shops that honor labor laws. He has also begun to publicize names of stores that sell products made in sweatshops. "Just last month we announced that sweatshop goods found their way to the shelves of J.C. Penney, Talbots and Macy's East," says Reich. "J.C. Penney had been notified four times in less than a year that it received U.S.-made goods manufactured in violation of minimum-wage and overtime laws."

Reich hopes to recruit Kathie Lee and other celebrities to his crusade, knowing that their clout at the till may encourage retailers to better monitor conditions in clothing factories or risk losing their stars. He is likely to find support. Diet guru Richard Simmons, who boasts that the 17 licensed products he sells in Wal-Mart and on QVC include "everything from socks to cookies," says he visits factories all over the world where his products are made to ensure that he doesn't fall into the same sweatshop trap that snared Kathie Lee. "Every bit of embroidery, every button, every pleat, I have to know about it," he says.

Soap star Deidre Hall says that before the Kathie Lee incident she had not thought to ask about labor issues at the Providence factories that produce her line of costume jewelry marketed on the Home Shopping Network. "When something like this happens, it makes us all more keenly aware of the problem," says Hall. "If a person so well-known for being a children's advocate could be fooled so easily, then which of us couldn't be?"

Wal-Mart, which claims it accepts no garments made in sweatshops, ended its relationship with the middleman who brokered the contract with Seo and has promised quarterly inspections of all Kathie Lee manufacturers. Yet Jay Allen, a Wal-Mart vice president, argues, "This problem is not just a Wal-Mart problem. It's an industry problem." Kathie Lee's collection is produced by vendors scattered around the U.S., Mexico, Nicaragua and several locations in Asia. Because vendors often use several subcontractors, checking for sweatshops is no easy task, says Allen. But, says Alan Howard, spokesman for UNITE, the needle-trades union, "they know when they bid out a job at a certain price, there's only one way the garment can be made. That work is going to another sweatshop."

New regulations are unlikely to provide quick relief to workers such as Lina. The Mexican-born mother of three jumped a fence east of Nogales, Ariz., seven months ago and came to New York City because the $150 weekly income she averages in sweatshops like Seo is more than four times what she can earn at home. "Coming to the United States is the only chance I had," she says. "If our countries were better off, we wouldn't come here. As it is, we do work no one else wants to do."

ROB HOWE
LIZ MCNEIL and RON ARIAS in New York City, JANE SIMS PODESTA in Washington and LYNDA WRIGHT and ANNE-MARIE OTEY in Los Angeles

  • Contributors:
  • Liz McNeil,
  • Ron Arias,
  • Jane Sims Podesta,
  • Lynda Wright,
  • Anne-Marie Otey.