NEW YORK — On a dreary Monday morning, shoe mogul Steve Madden’s desk was littered with three extra-large paper coffee cups and a fourth was in his hand. Eight employees gathered in his office to discuss the spring footwear collection amid more than 30 pairs of shoes scattered on the floor.
Madden, who was released from federal prison in April after serving 31 months of a 41-month term for money laundering and securities fraud, paced with excess energy. “That’s a great f—ing idea, Mikey!” or “That shoe is f—ing awesome,” he told them.
“We love the shoe and that’s what matters,” he said. “If it doesn’t sell, we’ll go down with both barrels blazing…like true gangsters.”
Madden is back and he has big plans. He was barred from working as a director or officer of a public company for seven years and now serves as his namesake firm’s creative and design chief. From that perch, he wants to increase the number of freestanding Steve Madden stores worldwide to 120 from 100 by next year. The company has opened stores in Mexico, Canada, Australia and Dubai, United Arab Emirates. Plans to extend to Europe are on hold because it’s like “bringing coals to Newcastle,” he said.
Jamieson A. Karson took over as chairman and chief executive officer on July 1, 2001. Karson was an attorney and Steve Madden board member. He runs the day-to-day business of the company, while Madden focuses on product development.
In five years, Madden sees the label as a full lifestyle brand. He wants to launch a women’s and men’s denim line in two years, and then expand into a full line of apparel.
And, as if that’s not enough, he also would like to try the music business. “I want to encourage young talent and distribute music in our stores. You’re seeing a lot of converging now,” Madden said. “A lot of the traditional outlets for music are changing. Starbucks is selling records. Soon you’re going to see Sam Goody selling shoes.”
Madden, who returned to work in April shortly after his release, is brimming with ideas. He is trying to come back from a fall that had its genesis in 1992, when Madden hired the Lake Success, N.Y.-based penny-stock brokerage firm Stratton Oakmont, founded by his childhood friend, Danny Porush, and Jordan Belfort.
The Securities and Exchange Commission already had accused Stratton Oakmont of engaging in price manipulation and employing high-pressure sales tactics. Stratton Oakmont took Steve Madden Ltd. public in December 1993 at $4 a share. By the following March, authorities busted Belfort and Porush. Belfort was banned from the securities industry for life and Porush was barred for one year from supervising other brokers. In 1995, the U.S. Justice Department sent subpoenas to some of Stratton’s clients, among them Madden.
He was charged with being a key participant in a series of manipulations orchestrated by Stratton Oakmont and Monroe Parker, another penny-stock brokerage firm based in Purchase, N.Y. Madden served as a “flipper,” who secretly purchased stock on behalf of the firms and retained an agreed-upon profit for the transaction. Stratton, with Madden’s knowledge and participation, manipulated his own IPO.
Madden was arrested on June 20, 2000, on charges of conspiracy to commit money laundering and securities fraud. In May 2001, he pleaded guilty to the charges. As part of his plea deal, Madden gave up his ceo status and must pay more than $7 million in fines.
Also in May 2001, he signed a 10-year contract to serve as the brand’s creative and design chief. Last July, the contract was amended and extended through 2015. His annual salary is $600,000, which he received while serving time at the minimum-security Eglin Federal Prison Camp in Florida. He also has a $200,000-per-year nonaccountable expense allowance and earns bonuses equal to 2 percent of the company’s earnings before interest, taxes, depreciation and amortization; 2.5 percent of net sales from new businesses, and 10 percent of license income above $2 million. The company has several licenses for the Steve Madden brand, including handbags, eyewear, hosiery and belts, and is the licensee for L.E.I. footwear, Candie’s Footwear and Unionbay men’s footwear.
“Even though it seemed harsh at the time, the judges were fair with me,” said Madden, seated at his desk in the company’s headquarters in Long Island City, Queens. He was dressed in jeans; an untucked, light blue Oxford; cowboy boots, and a Syracuse University baseball cap. “I made some mistakes and I’ve paid for them. Now I’m getting a second chance.
“What can I say?” he asked plainly. “I regret breaking the law; that was a mistake. It was my fear, greed and insecurities that made me get involved with these IPOs, which I wish I hadn’t done.”
After a long pause, Madden added, “I really don’t regret it that much. I regret the mistake, but I feel like a different guy now.”
Shares of Steve Madden Ltd. fell almost 15 percent to $11.85 on the day of his arrest before Nasdaq halted trading. When trading opened again two days later, the stock dropped to $6.88. On Friday, shares closed at $24.99. Stock in Steve Madden Ltd. rose sharply this month after the company said third-quarter profits will be significantly higher than Wall Street’s target because of stronger-than-expected sales. On Oct. 7, the company said it expected third-quarter net sales in the range of $99 million to $100 million compared with $88.6 million in the same period of the prior year, an increase of 12 to 13 percent.
While Madden was “away,” a word he frequently used to describe his time in prison, he said: “I was kept up [on the business] by people who would visit, but really I was out of it. They ran the business. But I came back to a brand that was as hot as ever.
“Most of the people here have been here for a long time, and they know the way I work and they focus on the product first,” he said. “We go with what we like. Damn the torpedoes. That’s our philosophy, and it has worked for the company.”
Madden said he didn’t worry about the company during his time at Eglin, which has housed public figures such as fashion’s Aldo Gucci, Watergate conspirator E. Howard Hunt and former Maryland governor Marvin Mandel. “There wasn’t much I could do,” he said. “I had to focus on just getting through the day, which was tough.”
He lifted weights and read, mostly novels and biographies. His favorites were biographies of Franklin D. Roosevelt and Anthony Kiedis, lead singer of the Red Hot Chili Peppers. Madden’s varied taste is evident in the content of his bookcase, which holds an oversized trophy inscribed: “World’s Best Brat.”
“The Beatles Unseen Archive” and “Big Deal” by mergers and acquisitions wizard Bruce Wasserstein share shelf space with “PrePop Warhol” and “The Treasured Writings of Kahlil Gibran,” a volume of works by the Lebanese poet and philosopher. Videos of past seasons of “The Sopranos” and “Six Feet Under” are stacked near golf books.
In March, a month before Madden returned to the Tudor-style headquarters that houses his staff and factory, a barrage of advertisements alluding to his homecoming hit billboards and magazines. Slogans such as “A new meaning for the word springtime,” and “There’s one pair of shoes that’s been impossible to fill. Steve returns spring 2005,” appeared in white block letters on a solid black background. Madden said he had nothing to do with the campaign, which resulted from a collaboration between the Steve Madden Ltd. team and the advertising firm Cramer Krasselt, based here.
Madden said he isn’t convinced many customers were aware of his imprisonment. “I’m sure consumers in New York and Los Angeles knew, but in the rest of the country, I’m not sure,” he said. “I think the ads were just trying to have a sense of humor about the whole thing. We certainly got enough bad press when I went in, so it wouldn’t be so bad to have good press every once in a while.”
The University of Miami dropout who battled addictions to drugs and alcohol said he befriended other inmates. They understood what Madden was going through and caused him to change his views of the judicial system. “There’s a despair and a struggle that goes on and you bond through that,” he said.
Unlike another just-released executive, Martha Stewart, who has thrust herself into the spotlight with her television programs, “Martha” and “The Apprentice: Martha Stewart,” Madden wants to stay relatively low-key. “I don’t think I want the publicity that Martha’s gotten,” he said. “I just want to make good shoes. I’ll leave all that other stuff to other people.”
As creative and design chief, Madden spends his time focusing on product design, store design and marketing. The addition of Steven by Steve Madden, a line of shoes featuring, as Madden said, “expensive leather for a sophisticated girl,” and Luxe, launching this spring, featuring “wild” and “over-the-top” styles, extended the brand’s reach. There are two freestanding Steven stores, but plans are in motion to open 10 in the next two years.
“We are a designer brand,” Madden said. “We don’t do a runway show at 7th on Sixth and we maybe don’t get the respect that a Marc Jacobs gets, but I feel like we design more shoes than anyone in the U.S. If you stand outside on a corner, you’ll see more Steve Madden shoes than any other designer in America.”
The market has shifted in the three years Madden was jailed. “There are less accounts to sell, but that’s something that’s been happening over the last 10 years. Before I went away, we had Dayton-Hudson, May Co. and Marshall Field’s,” he said. “Now, it’s all just one big company.”
Speed-to-market was a change that Madden welcomed. Consumers seem to respond to the immediacy of his product, and the fashion calendar and the weather are intricately connected in a way they hadn’t been before, he said. “Girls will wear sandals right through September and October and they’ll wear boots through to June.”
Prison also changed Madden in a highly personal way. “Now the ground is fertile,” said the self-proclaimed “noncommitment type,” who plans to marry Wendy Bellew, director of operations for the company, in January.
“I know now that money is not the most important thing.…It was a painful lesson, but I hope it made me a man.”