Wednesday, April 6, 2005

Hail the Returning Felon

Steve Madden, the shoe guru, will be getting out of federal prison soon after serving a 3+ year sentence for securities fraud.  His company, Steve Madden Ltd., which is publicly traded, has started running ads welcoming his return in a manner that has brought to mind the rousing welcome Martha Stewart received upon her release and return to work at her company.  A New York Times article (here) notes that ads being run in various magazines that turn on the idea of "spring" -- both the season and Madden's release from prison to a halfway house (his sentence runs through Sept. 2005).  While he has been serving time in the Coleman (Low) FCI in Florida, Madden's position with the company has been its "Creative and Design Chief."  The company's 10-K (here) discusses the employment agreement:

The Company has an employment agreement with Steve Madden, its Creative and Design Chief, which provides for an annual base salary of $700 through June 30, 2011. Mr. Madden is entitled to receive base salary payments during periods that he is not actively engaged in the duties of Creative and Design Chief. The agreement also provides for an annual performance bonus, an annual option grant at exercise prices equal to the market price on the date of grant and a non-accountable expense allowance. However, the Company is not required to pay the bonus for any fiscal year that Mr. Madden is not actively engaged in the duties of Creative and Design Chief for at least six months, the Company is not required to grant an annual option if Mr. Madden is not actively engaged in the duties of Creative and Design Chief for at least six months out of the twelve months immediately preceding the grant date for such annual option and the Company is not required to pay the expense allowance for any month during which Mr. Madden is not actively engaged in the duties of Creative and Design Chief.

If I'm reading the disclosure correctly, Madden has received his base salary while in prison, but not the bonuses, assuming he conformed with Bureau of Prison regulations that do not permit federal prisoners to conduct outside business while in its custody.  Madden also owns approximately 26% of the company's shares. 

It may be that those with eponymous companies in fields requiring creativity (as opposed to manufacturing or financial skills) are untainted by convictions because their creative ability is such a valuable asset to the company. (ph)

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