By Jeff Lipton
Dressed in his typical baseball cap this one from the Tampa Bay Buccaneers neatly-pressed jeans and long sleeve shirt rolled up to the forearm, Madden looked tired not from running around his showroom, but from more than a year of legal troubles that have hounded him for a mistake he admittedly made in the early 1990s when his company was just getting off the ground. Now he is headed for jail, sentenced to 41 months in a prison camp in Pensacola, Fla. beginning Aug. 15 for securities fraud and money laundering.
In an exclusive interview with the Nassau Herald at his 6th Avenue showroom, Madden, 45, spoke about growing up in the Five Towns, his road to recovery from drug and alcohol abuse and how a conviction for stock manipulation has forced him to regain the reputation he labored so hard to build, as he repays his debt to society.
Steve Madden's life has a story-book feel. He worked his way up: from stock boy, to self-proclaimed cobbler with little cash reserves, to CEO and chairman of one of the hottest and most successful shoe companies in the U.S.
Roots in Five Towns
Born in Cedarhurst on March 23, 1957 to parents Sydelle, who worked at Field Travel in Woodmere, and John, who was in the fabric business, Madden learned hard work and that nothing came easy.
It was a typical family, he said. It was sort of like Ozzie and Harriet. It was very much a typical American family in the 60s.
The Five Towns were great. Geographically, it's such an interesting place to grow up. You've got the beach and you've got the bay. I guess the beach gives it another dimension. I guess all neighborhoods are the same to kids. But we had the beach on top of everything else. It gave the whole area a whole other flavor.
When he was three, his family, including older brothers John and Luke, moved to Rand Place in Lawrence, near Sutton Park. Madden attended Number One School in Lawrence, Lawrence Junior High School and then Lawrence High School before going off to the University of Miami.
His father, a native of Inwood who died in 1996, graduated from the high school in 1932, where he excelled playing football and basketball for the Golden Tornadoes.
What's interesting is that my father was a gentile, a Christian, and my mother was Jewish, Madden said. I think that gave me an interesting perspective on the Five Towns and on life. I had that kind of unique perspective and lots of friends.
Where it all started
As a junior in high school, one day he went looking for a job and walked into Toulouse, a shoe store on Cedarhurst Avenue, where he was hired as a stock boy. He said divine intervention played a role in him choosing a shoe store as his first place of employment.
I loved it. I knew instantly that this was going to be my life's work. It was one of those moments. I had a moment of clarity as a 16 year old. This was something I would love doing. I didn't know what it would be, whether it would be design or sales. But I knew I was going to get in this business somehow. I loved retail, so I was very fortunate.
After a brief stint in college, he returned to the Five Towns and worked at Jildor, another local shoe store, from 1978-80.
I often say to kids no matter what it is or no matter how much it's for, find something you love doing and stay with it. It doesn't matter if it's being a policeman or teacher. It's worth it and not just from a monetary standpoint. Chances are if you love something, you will be good at it.
How his troubles began
Growing up in Lawrence, one of his best friends was Danny Porush, whom he met at the Number One School. They remained good friends throughout high school. It was Porush who later introduced him to Jordan Belfort and their brokerage firm, Stratton Oakmont in Lake Success, N.Y.
Madden said that when he was ready to start his own business, he had only $1,100 in 1989 and needed to raise capital quickly.
I got introduced to Stratton Oakmont in the early 90s because of Danny, and through Danny. He was running the place as a lead broker. They were raising money for companies, for start-up companies. At the time I wasn't able to raise capital anywhere. I couldn't even get $20,000 on my credit card. So, when I heard they could raise money for me, I jumped at the chance.
I'm a cobbler, not a financier.... We were all intoxicated by the times. Just the fact that they were raising money and I was a designer and not really sophisticated about raising money. Let's just say I wasn't careful about my choices. I was remarkably unsophisticated. And it was very unfortunate the way things turned out. And I'm truly sorry about it.
Madden was indicted in June 2000 on federal securities fraud charges, accused of helping to defraud investors in 23 fraudulent initial public offerings [IPOs] of stock, including the December 1993 IPO of his own company. Along with Stratton Oakmont, the issues were underwritten by the Monroe Parker brokerage firm. Madden was accused of helping the brokerage firms control the supply of thinly-traded small stocks so they could pump up demand by having hundreds of brokers make high-pressure telephone sales pitches to small investors. After the price rose, the brokerage principals would sell out. Madden was accused of acquiring stock cheaply in return for selling it back to brokerages for a profit.
In May 2001 Madden pleaded guilty to two counts of money laundering and securities fraud, but neither count involved the stock of Steve Madden, Ltd.
With the capital, he was able to open his first store in SoHo in 1993. Riding high on Madden's flair for creating fashion-forward shoes that captured the imagination of a generation of young women, the business took off in 1994 as Steve Madden, Ltd. shops opened from coast-to-coast.
Today, Steve Madden Ltd. employs 1,100 people consisting of a wholesale business with five divisions, a retail business comprised of 74 stores in the U.S., and a private label business. They have plans to open about 10 stores a year.
Last year, the company had sales of $245 million, ending up the year with about $50 million in excess cash. Not bad for a cobbler, Madden said.
Yeah it helped me get resources that I wouldn't ordinarily be able to get, Madden said of diving into the stock market. I just learned [about IPOs], got a quick schooling in it. No, I didn't think it was illegal. Stupidity on my part.
Although he has been sentenced to 41 months by Judge Kimba Wood in southern district court, Madden faces another sentencing in eastern district federal court before Judge John Gleeson on April 26. He faces up to 41 months there as well, in a sentence that should run concurrently with his other one.
Loyalty plays a big part
Madden said he has not kept in touch with his childhood friend Porush. I have no relationship [with Danny] but that's a very sad story. It's a very sad story and I pray for him. Sad for everybody.
Loyalty remains important to Madden. He relinquished his title as CEO on July 1, 2001 to Jamie Karson of Woodmere. Karson has been a partner in the New York City law firm of Tannenbaum Helpern Syracuse & Hirshtritt LLP.
It's definitely a large learning curve for me, Karson said. I was a lawyer for 18 1/2 years. But it's been a very smooth transition. Steve's built an amazing business. And it's great to be in this job. Everybody in the company is so energized and motivated by Steve. Steve has been the visionary behind the company. He's built a company where people love to come to work. They work very, very hard and I think that's a large reason why the company has had so much success.
None of these things that he pled guilty to should detract from the huge success that he's built, which is not just a company, but a brand, a national brand.
Madden said he has all the confidence the company will not only survive without him while he is in jail, but thrive. It's just sort of trusting Jamie and trusting the people we have and focusing on the look of the shoes and the look of the stores, said Madden, who said his title is now the head designer. I have a great team. When I get out, I have every confidence that I will be bigger and better than ever. But he added that he has no clue what he will be doing after serving his time. We're just taking it a day at a time. I just want to get it behind me and go on with my life.
Under the sentencing agreement, he can't be an officer of the company for seven years. But the company has a 10-year contract with Madden, which will pay him what is akin to a royalty deal, Karson said. Published reports say it is for $700,000 a year, plus bonuses.
Whatever it is, it's not enough, Madden said tongue-in-cheek when asked about his compensation package.
The Florida prison Madden will report to in August is an air force base, a minimum security camp. I have a lot of different feelings but mostly I'm relieved that I can put this behind me and get my life back. I am nervous, scared, but I'm also relieved. I am relieved, truly that it's over with and I think it will go by quickly and that I can get on with my life.
Madden added, We built our business on loyalty. We are a family here. What I have loyalty to most of all is to the process of trying to make cool shoes.... We don't abandon that, no matter how big we get, no matter what's going on in my life. If I'm confused or feeling nervous or fearful, what I try to do is go make a shoe. That's the kind of thing I've instilled in my design team.
You know building a $300 million company is not that complicated if you have the right people around you. And as the leader, I would tell my guys,
