Once upon a time Steve Madden was man who knew how to please just about any woman of any age. Give her some cute shoes. Even better, design and sell some of the trendiest shoes to hit display windows. If only he had been as savvy about how to please investors.
In April 2002, Mr. Madden found that neither his investors nor federal judges take too kindly to stock manipulation and securities fraud. Steve Madden's talents as a shoe designer helped him build a 240 million dollar empire in his own name. But by his own admission, that wasn't enough -- he was greedy for more.
His greed cost him about eight million dollars and control of the very company that brought him such riches. Madden was sentenced in 2002 to 41 months in prison for his role in a stock swindle scheme coordinated by the now-closed brokerage, Stratton Oakmont. His wrongdoings include conspiring to manipulate the stock prices of more than 20 companies, including his own. And, he did it at the expense not only of the public but his own investors who lost more than 100 million.
Besides paying restitution, Madden had to resign as CEO of Steve Madden Ltd and leave the board of directors. He is also barred from holding a position as officer for seven years. However, he did retain a creative position until his prison sentence began that fall and will likely fill that capacity upon release later this spring.
Meanwhile, those left to keep the company going in his absence quickly started their damage control efforts. A new board of directors was quickly assembled. Among those elected were Madden's brother and a corporate accounting guru. Once their former leader began repaying his debt to society, company heads began cleaning Steve Madden Limited's financial house; making sure stock prices accurately reflected the health of the business.
The company fully cooperated with the SEC's investigation and hired an independent auditing company to keep watch over the process. These days, the company's financial practices are an open and well-kept book. Anyone can get the latest financial news from the same site you log on to for the latest shoe designs.
After heading off anymore potential legal woes, management began to focus on keeping the business itself walking tall. If the company's sales reports are any indication, not having "Steve" hasn't really hurt Steve Madden Limited. While the founder has been in a Florida prison, the company's management built on his vision by expanding into other areas.
"Steve" by Steve Madden moved the company from the trendy 16 to 24 year old demographic into upscale footwear for a more mature crowd. The company licensed Candie's and Unionbay footwear for men. Rather than try and replace or substitute Madden's design eye, they took what they had and introduced it to new markets. It worked. According to company reports, nearly all of the brands have increased profit margins and inventory levels. There are plans in the works to open between twelve and fifteen new retail stores in 2005. In a press release, management expressed hope that this year will be even more profitable than last.
The company has also launched a rather interesting press campaign celebrating Steve Madden's upcoming release from prison. One features a girl wearing an ankle bracelet and another features an empty pair of shoes with the words, "There's one pair of shoes that's been impossible to fill. Steve returns Spring 2005." Others allude to Madden getting "sprung" in Spring 2005. Financial Dynamics, the shoe retailer's investor relations agency, says the campaign is a positive way of dealing with the prison sentence. It makes light of the company's troubles, sending a message that the board is over it and customers should feel the same way. It's also a sure fire way to get people talking about the brand. When it comes to sales, the only bad publicity is no publicity.
A statement from that agency, Financial Dynamic, reads: "Steven Madden Ltd. looks forward to the much anticipated return of the unique talent and creative design expertise of Steve Madden in the spring of 2005. Further, the company believes the current advertising campaign embodies and enhances the Steve Madden brand."
If the rise in Martha Stewart stock is any indication, getting out of prison seems to be "in." The publicity generated by Madden's return could translate into increased exposure and, in turn, increase sales in the future. Plus, having him back at the head of the creative team will bring his company something it hasn't had in a while... his ability to give the millions of women who buy his shoes what they want.
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