By Jae-Ha Kim
Chicago Sun-Times
June 22, 2000
After building an empire as a celebrity shoe designer, Steve Madden finds himself in a precarious situation, teetering like someone in the platform shoes that earned him fame and $163 million in sales for his company in 1999.
The New York-based designer–also the chairman and chief executive of Steve Madden Ltd.–was arrested and released on $750,000 bond Tuesday after his indictment on 17 counts of stock fraud and conspiracy. It is alleged that Madden, 43, participated in schemes involving two brokerage firms that are no longer in business, Stratton Oakmont and Monroe Parker.
Initial indications from Chicago retailers who sell Madden products are that the trendy designs remain popular with young shoppers. But Madden’s popularity with wholesale buyers may suffer.
Stock in Madden Steve Ltd. already suffered in the wake of the arrest, when the Nasdaq stock exchange halted trading at $11.19 a share, down $1.94 on Tuesday, and half its price in April. The stock didn’t trade Wednesday.
Prosecutors charged that Stratton Oakmont and Monroe Parker sold cut-rate blocks of stock in companies making their initial public offerings to Madden, who illegally had agreed to sell the stock back to the brokerages at a markup once public trading began.
Madden made a profit on the difference between what he paid for the stock and the price at which he sold it, and the brokerages profited by using Madden’s shares to manipulate the market price for the stocks in post-public-offer trading, prosecutors say.
According to prosecutors, both brokerage firms pleaded guilty to fraud. However, Madden’s attorneys say he is innocent.
Retail analysts don’t forsee Madden’s business suffering, as long as he is not convicted.
“My guess is that if his flair for designing shoes that women want continues, this won’t make any difference at all,” says George Rosenbaum at Leo J. Shapiro & Associates, a Chicago-based market research firm. “On the other hand, if he or his team stumbles [artistically], that’s going to be a problem for him.
“The bigger crime would be bad design,” he said.
But Larry Lund, a consultant at the Real Estate Planning Group, isn’t convinced that Madden can shrug off the charges.
“Companies don’t want to be associated with individuals who may be of ill repute,” Lund said. “He doesn’t have the profile of a Michael Jordan, but when a product is associated with an individual, his character does matter. Look at how Sears dropped Benetton from their inventory because of their ads [featuring Death-Row inmates].
“What may happen is that the stores his shoes are in now may choose to buy less of his products, since space is such a premium,” Lund said. “There are a lot of people who would love to fill that hole.”
Madden’s shoes are available in 3,000 department stores and 60 Steve Madden stores, including three in the Chicago area.
Business is running as usual at the Madden store at Water Tower, said a store manager, who added that no customers have asked about the arrest.
And Marshall Field & Co. on State Street, which is debuting its remodeled shoe section July 16, reports that it will offer a selection of Madden’s designs.
Madden’s trendy creations are a must for the teen/young adult set, including celebrities such as Christina Aguilera, Janet Jackson and Katie Holmes. Madden is no ingenue in the design world. In 1990, with barely $1,000 in his bank account, he set up shop. Around the same time that Doc Martens gained popularity with thick-soled boots and shoes, Madden earned a name for himself with his ’70s-friendly platform heels that gave women height without the discomfort of stilettos.
“He has done an excellent job at giving the junior market what it was looking for: something different from what their parents were wearing,” says Meg Rottman of Style PR, a marketing agency specializing in fashion.
Contributing: New York Times
