With Founder in Jail, Shoe Firm Is Seen as Survivor

The only fashion statement shoe designer Steve Madden is likely to make in the next few years will be whether he uses twin-needle pin tucking or free-motion stitching for the mailbags he could end up piecing together in prison.

Or maybe which orange jumper he’ll wear to the dining hall.

But what of the trendy footwear company that bears his name? How will it carry on while its founder, former chief executive and creative force sits behind bars?

Business school experts said Steven Madden Ltd. has played it by the book, making needed management changes and replacing Madden as chief executive with Jamieson Karson.

In fact, negative headlines have barely seemed to touch the New York company’s stock as its price has slipped only about 10% on Nasdaq since Madden was arrested last year. On Friday, shares closed up 13 cents at $16.25. The company’s net income rose 40% to more than $16 million in fiscal 2000 on sales of more than $205 million.

Last month, the disgraced designer pleaded guilty to federal charges of securities fraud and money laundering for helping manipulate 22 initial public offerings, including his own firm’s 1993 IPO. He faces 41 months to 51 months in prison and fines totaling $8 million when he is sentenced in September.

As part of a plea agreement with prosecutors and the Securities and Exchange Commission, Madden, 44, also agreed he would not hold office in a publicly traded company for seven years from July 1.

Madden, a University of Miami dropout who sold shoes on Long Island before becoming a designer, is now officially “chief creative officer” of the company--a title he will have to relinquish when he is behind bars.

The crux of the matter is whether the creativity of an imprisoned man remains free. Madden has been the creative force behind a company adored by millions of teenage girls tottering around on his trendy platform soles.

Traci Billingsley, a spokeswoman for the federal Bureau of Prisons, said inmates may not conduct any form of business. Madden would only be able to design shoes as a hobby and could not send out the designs.

“Once he sells them, that constitutes conducting a business,” she said. But she could not say whether passing on ideas for shoe designs constituted carrying on a business.

For his part, Madden is not speaking publicly, although he did give an interview recently to the fashion industry bible Women’s Wear Daily. “I’m a cobbler, not a hardened criminal. I think I will be resting,” he said when asked if he could contribute to the company from jail.

An SEC spokesman could not say if passing along ideas for designs constituted acting as an officer of the company.

But Charles Koppelman, Steven Madden Ltd. chairman, said the board “decided it would be in the best interest of the company for Steve to continue to create and design for the company.”

Koppelman said Madden will act as “creative officer” until July 1 and “is expected to return to this position upon completion of any time he serves.” A spokeswoman for the company told Reuters that Madden will return as “creative and design chief”--a position that is not a company officer--after serving his sentence.

In the meantime, a 15-member team under design director Rachelle Watts, will work on its Steve Madden, Stevie’s, LEI, David Aaton and men’s lines.