graphic
News > Deals
Retailer charged with fraud
June 20, 2000: 5:28 p.m. ET

Shoe retailer allegedly participated in schemes to manipulate 22 IPOs
graphic
graphic graphic
graphic
NEW YORK (CNNfn) - Steve Madden, a designer and retailer of women's shoes, was arrested Tuesday on federal charges of participating in the manipulation of 22 initial public offerings, including the deal involving his own company, Steve Madden Ltd.

Madden faces both criminal and civil charges, including several counts of securities fraud and money laundering. The money laundering charge carries a maximum fine of $1 million and up to 10 years in prison. The securities fraud carries a maximum fine of $500,000 and up to 25 years in prison.

The Securities and Exchange Commission also seeks to bar Madden from serving as an officer or director of a public company, which would prevent Madden from acting as president and chief executive of Steve Madden Ltd., a women's shoe retail company which is traded on Nasdaq.

Madden was indicted Tuesday on separate criminal charges in both the U.S. District Court for the Eastern District of New York and the U.S. District Court for the Southern District of New York.

In a statement released Tuesday afternoon, Madden's company said it had not yet seen the charges filed against its chairman and CEO, but had been advised by Madden's personal attorney that he denied any improper conduct and "will vigorously defend himself against any and all charges."

Steve Madden shares lost nearly 15 percent of their value Tuesday, falling 1-15/16 to close at 11-3/16.

A 'boiler room' scheme


Federal authorities allege that from 1991 to 1997 Madden acted as a key participant in a scheme orchestrated by the now-defunct underwriters Lake Success, N.Y.-based Stratton Oakmont Inc. and Purchase, N.Y.-based Monroe Parker Securities Inc.

Officials at Steve Madden Ltd. could not be reached for comment.

The SEC and federal prosecutors claim that Madden acted as a "flipper," buying stock in IPOs at a prearranged price and then selling it back at a set price in order to artificially inflate the price of the stock. In each of the 22 alleged deals, Madden would sell the stock back to the underwriters, Stratton and Monroe, and receive a predetermined profit on the deal, according to authorities.

"Investors thought it was a genuine distribution of stock, but it remained in control of Stratton and Monroe," said Wane Carlin, the SEC's associate regional director of the agency's Northeast regional office.

Similar to the film, "Boiler Room," Stratton and Monroe would earn huge profits by using high-pressure tactics to sell the stock to their own customers at artificially created prices, the authorities allege.

graphicThe authorities also claim that Madden helped manipulate the stock price for his own company, the Long Island City, N.Y.-based Steve Madden Ltd.  (SHOO: Research, Estimates), which went public in December 1993. According to authorities, Stratton acted as underwriter on the deal and allegedly used "flippers" to boost the stock's price, while Madden also misled authorities as to the relationship. Back to top

  RELATED SITES

U.S. Securities and Exchange Commission

Steve Madden Ltd.


Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney




graphic

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.