Shoemaker Pleads Guilty to Fraud
Shoe designer Steve Madden, who built a $200-million company based on his trademark chunky shoes for teenagers, pleaded guilty Wednesday to federal charges of securities fraud and money laundering.
“It’s been traumatic,” Madden told Judge Kimba Wood in a Manhattan federal court.
The guilty plea closes a chapter on a scandal that captivated the fashion industry. Madden was arrested last June in connection with manipulation of 23 initial public stock offerings underwritten by the now-defunct companies Stratton Oakmont Inc. and Monroe Parker Securities Inc. It included the 1993 IPO of his own company.
Madden pleaded guilty to similar charges of securities fraud and money laundering Wednesday before Judge John Gleeson in Eastern Federal Court in Brooklyn, according to Michele L. Adelman, one of the prosecutors in the U.S. attorney’s office in Brooklyn.
Under the plea agreement worked out with U.S. attorneys in both districts, Madden faces 41 to 51 months in prison, must forfeit $3 million and pay at least $5.18 million in restitution.
He could have faced a maximum prison sentence of 25 years. Both plea agreements still need to be approved by the judge. Sentencing is set for Sept. 6 in Manhattan and Sept. 7 in Brooklyn.
“Today is a difficult day for the company,” said Charles Koppelman, executive chairman of the board for the Long Island City, N.Y.-based Steven Madden Ltd. Madden, 44, who announced he was resigning as chief executive of the company earlier this month, will stay on as creative and design chief. The company said he is expected to return upon completion of any time he serves.
The fashion company also announced that the designer has reached a separate settlement with the Securities and Exchange Commission.
Under that agreement, Madden agreed to pay $1 million in civil penalties to the SEC and return about $5 million of illegal gains as restitution. He also agreed to be barred from serving as a director or officer of a public company for a period of seven years.
The SEC and Madden also settled a new civil complaint, filed Wednesday in Brooklyn federal court, in which the SEC charged Madden with insider trading.
In its complaint, the SEC charged Madden with selling 100,000 shares of Madden Ltd. stock May 31, 2000, after he already had been advised by federal prosecutors that he was a target of grand jury investigations in Brooklyn and Manhattan.
Under the settlement, Madden agreed to return $835,000 in illegal gains and interests and pay $784,000 in civil penalties.
Shares of the company closed at $16.13 on May 31, 2000. On June 22, the day Madden was arrested, shares plummeted to $5.50. On Wednesday, shares fell $1.02 to close at $15.01 on Nasdaq.
