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Steve Madden: Crisis of the Sole

The Long Island shoe salesman who built an empire by catering to the tastes of teenage girls is facing the toughest challenge of his life: an indictment for stock fraud. Who's testifying against him? Only his former best friend.

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It's lunchtime at Jerry's in SoHo, and Steve Madden is sitting at his regular table, surrounded by loyalists and having a bit of a fit. "I want pink! Not blue!" he's shouting in Long Islandese, holding up a fistful of Equal packets and shaking them in the air. He's joking -- well, half-joking anyway -- about the lack of Sweet'N Low by quoting from the Hollywood-mogul satire Swimming With Sharks.

Outside, twentysomethings stroll down Prince Street lugging tall boxes containing Madden's chunky-heeled version of this season's hot boots. Down below, in the subway, hundreds of ads bear his name and company logo, as well as computer-distorted photographs of doe-eyed teenage hipsters wearing oversize shoes. Tonight, Madden will take his courtside seat at the Knicks game beside his golf buddy and board chairman, Charles Koppelman, the entertainment impresario who recently spearheaded the takeover of Ford Models.

But here at Jerry's, Madden is so jittery he accidentally tears his Knicks ticket in two. Dressed in jeans, a white untucked oxford, and a Syracuse Orangemen baseball cap, the 43-year-old CEO looks unsettlingly collegiate. "I tell everyone I'm 42!" he shouts, in a voice that's reminiscent of Richard Simmons and P. T. Barnum. "I lie!" he adds sarcastically. "I don't know why." His lawyer winces, and Madden is off on a jag recalling the early days, before he had a $200 million public company, celebrity customers like Julia Stiles, and a die-hard teen following that lines up for hours just to meet him at his stores.

"I worked in Toulouse," he offers, referring not to France but to "a really hot store in the early seventies" in Cedarhurst, Long Island. "We sold platform shoes for men and women at the time of Ziggy Stardust, Alice Cooper. You remember when Elton had those platforms?" he asks, not waiting for an answer. "I was 16 years old. My boss was 26. He had his own business. He was this really cool guy. He drove a Mercedes. He was my idol." Madden raises his arms to steer the imaginary Mercedes.

"It was just Providence, you know?" he says. "How lucky can a guy be to fall into a shoe store and make it your life's work and be good at it? How lucky could a guy be?" Madden turns to his lawyer.

"The story's sad," Madden says. "It's a real American story. My old friends took me public, they turned out to be crooks, and I'm innocent."

"You tell me," the lawyer deadpans.

"I don't feel so lucky right now," Madden adds quickly. Suddenly humbled, he falls silent.

Last summer, Madden's luck turned when he was indicted for stock fraud and money laundering in both the Eastern and Southern Districts of New York. According to the charges, Madden secretly purchased stock on behalf of the principals of two corrupt penny-stock brokerage firms -- Stratton Oakmont Securities of Lake Success, Long Island, and Monroe Parker, of Purchase, Westchester -- helping them manipulate 29 initial public offerings, including that of his own company. That same day, the Securities and Exchange Commission came after him with a civil suit alleging Madden had employed "devices, schemes, and artifices to defraud." If convicted in either of the criminal cases, which are scheduled to go to trial this spring, Madden faces up to more than twenty years in prison and several million dollars in fines. If he loses the SEC case, which is on hold until the criminal cases are completed, he could be forced to pay millions more. Even worse, he could be barred from serving as an officer or director of any public company, including his own.

On the day of his arrest, while Madden was busy pleading not guilty to all charges and pledging his East Hampton country house and the Long Island homes of two friends in order to make bail, shares of Steve Madden Limited fell almost 15 percent to $11.85 before nasdaq halted trading. Two days later, when the stock (which trades under the ticker SHOO) reopened, it fell to $6.88. Though the stock has traded up as high as $13.88 due to a recent rally in the footwear sector, it has yet to regain its pre-indictment momentum.

"The story's sad," Madden tells me. "It's a great story. It's a real American story. My old friends took me public, they turned out to be crooks, and I'm innocent."

Even though he's been indicted, Madden is keen to talk. "I've always thought I should be in New York Magazine," he told me when I first contacted him in the fall. "I'm a New York story." His fellow executives weren't nearly as excited, and it took several calls to the company, as well as to Madden's personal lawyers, before I could meet him. "People are afraid because I'm candid," Madden explains. "They're always worried I'm going to get into trouble."

Even in an industry filled with colorful characters, Madden stands out. He speaks a mix of hip-hop lingo, Austin Powers-isms, and words of his own invention. One day in his showroom, he asks me, "You want a little lunchy-poo?" He also has a penchant for inventing nicknames: After our first phone conversation, I'm suddenly "Jo," then, alternately, "Jo-Jo."

Although Madden leads the sort of hip, expensive lifestyle you might expect of a rich, single, downtown New Yorker, he has his own quirky trademarks. He gets his wiry strawberry-blond hair cut by downtown stylist Jason Croy, but never appears in public without a baseball cap. He eats at fancy restaurants like EQ, but thinks nothing of whipping out nasal spray mid-meal. ("It's bad," he says, conceding he's been addicted since childhood. "Afrin doesn't work for me anymore.") On weekends, when he's not out at his home in the Northwest Woods or off golfing in Miami or Boca Raton, he likes to hang out at his SoHo flagship. "Sometimes, I'll be here on a Sunday and I'll think, What a loser you are! What am I doing here?"


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