Shoemaker Sentenced for IPO Scheme
Steven Madden, who parlayed platform sneakers and other trendy footwear for young women into a $200-million-a-year business, was sentenced Thursday to 41 months in prison for manipulating initial public offerings.
Madden, the former chief executive of the company that bears his name, admitted last year that he conspired with two brokerages to inflate IPO share prices. The scheme earned him $3.1 million and cost investors almost $100 million, authorities said.
U.S. District Judge Kimba Wood in Manhattan ordered Madden to serve 41 months in federal prison and pay $3.1 million in restitution. Madden could have received as many as 51 months.
“I was guilty of stupidity, arrogance, greed,” Madden told the judge.
“I just want the chance to get back my name.”
In a separate case, Madden has pleaded guilty in Brooklyn to federal securities charges.
He will be sentenced later this month to a concurrent jail term of 41 months, his lawyer, Joel Winograd, said.
Shares of Long Island City, N.Y.-based Steven Madden Ltd. rose 16 cents to $17.34 on Nasdaq.
The sentence was announced after the markets closed. Madden will resign as the company’s chief of creative activities before he reports to prison Aug. 15.
In his guilty plea, Madden admitted his involvement in fraudulent IPOs underwritten by Stratton Oakmont Inc. and an affiliated brokerage, Monroe Parker Inc., from 1994 to 1997.
In those deals, the two brokerages hid their stake in a company by moving securities into a “nominee” account owned by Madden. Under the scheme, brokerage officials would transfer substantial quantities of IPO securities to Madden, who agreed to sell them back to the brokerage at pre-arranged prices when trading began, an agreement sometimes called “flipping.”
The firms artificially inflated stock prices by promoting securities to unsuspecting investors, usually by misrepresenting a company’s prospects. Later, the brokerages sold their stake, which usually triggered a drop in share price.
One of those offerings was the 1993 IPO of Steven Madden Ltd., authorities say. Company shares almost tripled on the first day of trading in 1993.
