Charles Koppelman, ex-chairman and former chief executive officer of Martha Stewart Living Omnimedia, set the courtroom on fire for his brief, yet eye-opening testimony Thursday morning.
The self professed “singer then songwriter” told the court that he got into the fashion business when he was approached by Steve Madden on a golf course in the late Nineties.
“In 1997, Steve asked me if he could borrow $3 million. I only played golf with him three times, so I thought that was a little extreme,” said Koppelman matter-of-factly. Against the advice of his accountant, he lent Madden the money, which helped him get his brand off the ground.
Three years later, Koppelman was named chairman of the Steve Madden board, while Madden did jail time for securities fraud.
Koppelman helped Madden’s business flourish, and his status grew quickly. And then the mild-mannered Koppelman received a call from Martha Stewart. It was on the eve of her conviction in 2004 when Stewart asked the businessman for a meeting. They had only met a few times before, first at a birthday party, but that was sufficient. Koppelman invited her to his house a few days later, and she asked him to join the board as vice chairman and be a consultant for her company while she served jail time.
He quickly rose to chairman, having helped broker Martha Stewart’s Home Depot deal and Pet Smart partnership. Koppelman also put together Stewart’s Sirius Radio relationship, its Emeril Lagasse acquisition and a host of other deals, not to mention the Macy’s partnership.
“In 2005, I thought the brand was in great shape as a brand. The company was not in great shape,” Koppelman said, explaining that his goal was to grow MSLO’s merchandising business.
The exec said he believed MSLO had — and still — has a “wide-range of opportunities,” including international expansion and category expansion into “food, baking and healthy living.”
In 2005, MSLO’s Robin Marino and Susan Lyne approached Macy’s to work on developing a home goods business, but the deal was stalling, despite the fact that both Stewart and Macy’s ceo Terry Lundgren were interested.
Koppelman, a personal friend of Lundgren, contact the ceo to see if he could move the needle.
“I stepped in to see why it was not happening. It was clear to me that Macy’s wanted to make the deal and that Martha Stewart wanted to make the deal,” he said. “I met Terry at Rao’s restaurant when i thought this was becoming the never-ending saga…much like this [case] now.”
Stewart had a partnership with Kmart, which netted more than $1 billion in sales. Stewart said she would let that partnership expire and move on with Macy’s. Koppelman’s goal was to try to replace the revenue lost from Kmart.
He said they were “hoping” Macy’s would be a $500 million business and that Stewart’s Home Depot business would contribute “a significant” share, as well. In court, it has been revealed that Stewart’s Macy’s business brings in $300 million a year.
In order to pump up sales, MSLO inked other partnerships that didn’t interfere with the exclusivity clause in its Macy’s contract. That included designing for other brands.
On cross-examination from MSLO lawyer Anne Beaumont, Koppelman said he “didn’t think” MSLO needed to “ask permission” to design for other brands. In fact, MSLO was at one point in discussions with pop singers Jennifer Lopez and Marc Anthony to create home products within the Macy’s exclusive categories.
Those talks fell through and Koppelman brought the pop duo to Lundgren, who inked a fragrance deal with Lopez.
But the point was that Koppelman was a loyal friend to Lundgren, Macy’s lawyer Theodore Grossman explained, as he highlighted a widely-publicized incident with Wal-Mart Stores Inc.
In 2008, Wal-Mart featured Stewart in advertising with home wares in the background. That ruffled Lundgren’s feathers, and Koppelman had the ads pulled even though a future relationship with the discounter would have been lucrative in the long run.
During his questioning, Grossman revealed that in 2011, MSLO, which was struggling financially, had formed a “strategic partnerships committee,” which included MSLO board members Arlen Kantarian, Frederic Fekkai and Todd Slotkin. The committee, which was charged to evaluate new revenue streams for the company, hired Blackstone as a financial adviser.
Koppelman wasn’t involved in the process and had already been succeeded by Stewart as chairman of the MSLO board. The committee, along with Stewart, the board of directors and Blackstone had begun talks with J.C. Penney Co. Inc. to sell Stewart-branded goods in shop-in-shops within its department stores.
“I wasn’t involved in the J.C. Penney deal,” said Koppelman, who said he told MSLO board members and Stewart that they should “offer Lundgren and Macy’s the deal Penney’s was proposing.”
“They weren’t interested in the proposition,” Koppelman said.