Born in 1958 in Lawrence, NY; married Wendy Ballew (a footwear executive), 2005. Education: Attended the University of Miami, c. 1975–77.
Addresses: Office—Steven Madden Ltd., 52-16 Barnett Ave., Long Island City, NY 11104.
Worked at a shoe store, Toulouse, c. 1974–76, and at Jildor, a women's clothing boutique, c. 1978; began as sales representative for a footwear company, L. J. Simone, c. 1979, and held various other positions before leaving in mid-1988; founded Souliers; founded Steve Madden Ltd., 1990; became chair and chief executive officer when it became a publicly traded company, 1993; resigned both posts to serve as creative and design chief, 2001.
Few other American shoemakers ever achieved the brand-name recognition that Steve Madden enjoyed, but even fewer took such a dramatic tumble from the top. His company, Steve Madden Ltd., was one of the fashion industry's most surprising success stories of the 1990s, with his au courant boots, heels, and clogs dominating the women's mid-price market. In 2002, however, Madden was convicted on charges of securities fraud and money laundering, and entered federal prison. He was released in 2005 and was back on the job at his company's Long Island City headquarters soon afterward. His story, he hoped, would serve as a cautionary tale for his 500-plus employees, one that could help them mature "professionally and develop more long-term thinking and less instant gratification," he told Footwear News reporter Katie Abel. "Instant gratification is really about insecurity. I lived my life that way. But now I'm trying to say that we don't have to do that."
Born in 1958, Madden grew up in Cedarhurst, New York, one of Long Island's Five Towns conglomeration of suburbs. He came from a mixed religious background: His father, who owned a textile company, was Irish-American and Roman Catholic, while his mother was Jewish, as were a large number of Five Towns households. As a teen Madden began working in a Cedarhurst shoe store called Toulouse, which opened his eyes to the possibility that the fashion industry offered. "I was 16 years old," he recalled in an interview with Johanna Berkman for New York magazine. "My boss was 26. He had his own business. He was this really cool guy. He drove a Mercedes. He was my idol."
After high school, Madden spent two years at the University of Miami in Florida until his father, irate over Madden's poor grades, told him he would no longer pay tuition so that Madden could golf year-round. Back in Cedarhurst, he found a job at Jildor, a clothing boutique, and eventually moved into the city, where he lived in Greenwich Village and worked as a sales representative for a L. J. Simone, a wholesaler of women's boots. He spent the better part of a decade with the company, holding various positions and learning the business. But Madden was also battling substance-abuse problems, and in the summer of 1988, not long after he resigned from L. J. Simone, he was arrested for drunk driving and decided to enter a rehabilitation program.
Determined to start his own line of footwear, Madden teamed with a colleague from Simone, but the venture, which they called Souliers, failed. In early 1990, Madden launched his own company, naming it after himself and using a line of credit to pay for the cost of manufacturing 500 pairs. When the shoes were ready, he had a little more than $1,000 to his name, and took his first design—a clog with a pointy toe he called the "Marilyn"—around to New York City area stores himself in his car, literally selling them out of his trunk. His first big seller was the Mary Lou, a patent-leather Mary Jane style with an exaggerated toe, and the company expanded rapidly after that. Madden designed a steady stream of appealing new styles, initially capitalizing on the trend for platform heels in the early 1990s, and his label began to dominate the teen market in women's footwear. Even though it was barely five years old, Steve Madden Ltd. was regularly cited in the business media in articles about capturing the fickle brand loyalty of the teen consumer.
Madden opened his first freestanding retail store in the New York City neighborhood of SoHo in 1993, and later that year decided to take his company public with an initial public offering (IPO) of stock to be traded on NASDAQ (National Association of Securities Dealers Automated Quotations). The IPO was underwritten by a firm called Stratton Oakmont, one of whose partners was Madden's longtime friend from Cedarhurst, Danny Porush, whom he had known since second grade. But Stratton Oakmont was less a legitimate brokerage firm than what is known as a "boiler room" operation in financial-industry parlance. It sold cheap stocks out of a onetime car dealership in Queens to potential investors over the telephone; when other investors noticed the spike in sales, and decided to buy a few shares, the price of the stock would rise, at which point Stratton Oakmont "would then dump their own stock, reaping vast and entirely illegal profits," explained Chris Ayres of the London Times.
Those profits allowed Porush and his two partners to underwrite IPOs, most of which were for companies they knew were doomed to fail, but would give them some quick profits before bankruptcy. Madden's case was different, however: In the first year, its stock (traded as "SHOO" on NASDAQ) performed miserably, like most of the Stratton Oakmont ventures, but Madden's company posted exceptionally strong sales numbers for 1994, and then tripled that figure in 1995. The price of its stock, along with earnings for its investors, rose correspondingly. By 1997, sales had reached $59 million, and Madden began to cut licensing deals for a denim line as well as handbags, hosiery, and jewelry.
The first hint of trouble for Madden came in January of 1997, when Stratton Oakmont declared bankruptcy. The firm had been under investigation by the Securities and Exchange Commission (SEC) for some time by then for its questionable business practices, and when it turned out that the Stratton partners were sending cash to Switzerland with the help of their drug dealer, the investigation turned into a criminal one, too. Madden's childhood friend Porush and another partner, Jordan Belfort, were arrested in September of 1998, and agreed to cooperate with law-enforcement authorities after spending a week in jail. They were released and sent out to meet with their associates wearing hidden listening devices to record conversations, and several of their co-conspirators were indicted as well.
Meanwhile, Madden and Belfort had had a falling-out in 1997, and their disagreement mushroomed into a lawsuit. In the course of these legal proceedings, a document turned up that appeared to have given Belfort control of Madden's company. It dated back to the time of the 1993 IPO, when Belfort was under investigation by the SEC and was barred from holding executive office or a board seat with any publicly traded company. His initial investment in Madden's company would have given him such a position, and the agreement seemed to subvert the SEC rules. According to its terms, Madden was chair and chief executive officer of his company, but Belfort was actually in charge. In court, Madden claimed he had been misled into signing the agreement by Belfort, whom he "trusted as my friend, business associate, underwriter, and confidant," he said, according to the New York profile by Berkman.
For months, rumors swirled on Wall Street and in the footwear industry that Madden would be formally charged for some role in the Stratton Oakmont swindle. Finally, in June of 2000, he was arrested on charges of stock manipulation involving several IPOs underwritten by Stratton Oakmont between 1991 and 1997. The scheme was even more complicated than the secret deal between him and Belfort, involving another brokerage firm called Monroe Parker Securities. "The brokerage houses would hide their stakes in the companies they took public by transferring shares into the accounts of 'nominees,' who included Madden," explained Ayres in the Times. "The nominees then sold the shares back to the brokerages at pre-arranged prices after trading began on the open market. At this point, the brokerages would begin aggressively pumping up the value of the shares by selling them to unsuspecting investors."
The charges against Madden were both civil and criminal, and the Times Ayres estimated that unwary investors had lost a total of $100 million, while Madden and his co-conspirators enriched themselves by $7 million. He faced up to 20 years in prison for his involvement, and though his footwear company was not part of the case, the price of its stock began plummeting when news of Madden's arrest became public. NASDAQ even temporarily suspended trading on it for a few days, but when the ban was lifted it reopened at an even lower price. Madden resigned as chair, entered a plea of not guilty, and posted the unusually high bail of $1.5 million by using his summer home in the Hamptons as collateral as well as property of two friends. In May of 2001, he resigned as chief executive officer, too, and the company's stock seemed to recover once Wall Street affirmed a capable management team was handling affairs.
The three separate cases against Madden dragged on for nearly two years. The SEC's insider trading and fraud case was settled when he agreed to pay a fine of $1.8 million. He entered a plea bargain with federal prosecutors for one of the criminal cases, and in April of 2002 a federal judge handed down a sentence that called for 41 months in prison, levied an $80,000 fine, and ordered him to pay $3.1 million in restitution. Madden evaded a heavier sentence by claiming that his judgment had been clouded by alcohol and prescription drug abuse. He told the judge, "I am guilty of stupidity, arrogance, and greed," he said, according to Rob Walker in Slate, adding, "I deeply regret all the things I've done."
Madden began his stint at a federal prison in Florida in September of 2002. In a somewhat controversial arrangement, he remained on board at the company he founded as its creative and design chief, with a salary of $700,000 a year. The shoe company continued to thrive, with nearly 100 freestanding stores and a still-devoted teen and twentysomething customer base. He was released in April of 2005 after serving 31 months, describing his time there as "mind-blowing" a few months later in an interview with Marisa Wong and Fannie Weinstein for People. "I checked myself in, and the next day, I was cleaning bathrooms and picking up cigarette butts out in the rain." He also said that there were things he missed, among them "being able to take a shower without shower shoes," he told Wong and Weinstein. "Walking down the street on a fall day in Manhattan. Getting up in the morning and reading the newspaper." He also completed a court-ordered program for substance abusers during his incarceration.
Madden's time in jail did turn out to have one unexpected bonus: His director of operations, Wendy Ballew, regularly came down to Florida to visit him, and the two fell in love. Madden proposed to Ballew shortly before his release, and the two married late in 2005. He remains an integral part of Steve Madden Ltd., though SEC rules forbid him from holding an executive position or seat on the board until 2008. Back at the office, he tacked up a famous saying from Britain's World War II-era prime minister Winston Churchill. "'If you're going through hell, keep going,'" he quoted it to Wong and Weinstein in the People interview. "That's what I've done. I've kept going."
Footwear News, May 26, 1997, p. 14; October 17, 2005, p. 8.
New York, February 26, 2001.
People, November 21, 2005, pp. 151-53.
Times (London, England), April 6, 2002, p. 52.
"Genius of Capitalism: Steve Madden," Slate, http://www.slate.com/?id=2064214 (October 6, 2006).