Forever Barbie_ The Unauthorized Biography of a Real Doll - Lord [43]
Whatever the true cause of the nightmare, it dragged on. On September 6, 1974, Mattel requested that trading in its stock on the New York and Pacific stock exchanges be suspended; it had "discovered" enormous misstatements in its financial reports for fiscal 1971 and 1972. Then, on October 2, 1974, Mattel consented to the SEC's request that it make people outside the company a majority of its board of directors—an unprecedented move that, when Mattel agreed to it, overturned the traditional stockholders' right to a voice in the selection of their company's directors.
Mattel also agreed to appoint a special counsel and a special auditor to investigate its financial statements. On November 3, 1975, when the special counsel filed a report confirming that Mattel had cooked its books, the company settled its shareholder suits out of court for more than $30 million. Ruth and Elliot got the boot, but, as part of the settlement, they agreed to contribute two million shares of Mattel stock and to reimburse the company for $112,000 in attorney's fees. Rosenberg also agreed to pay back $94,000 in attorney's fees, cancel his severance agreement, and contribute $100,000 cash.
On February 16, 1978, Ruth Handler and Seymour Rosenberg, comptroller Yashuo Yoshida and two other employees were indicted by a federal grand jury for conspiring to violate federal securities, mail, and banking laws by preparing false financial records. The crimes spelled out in the indictment are chilling. It says that the bogus data was used to inflate the market price of Mattel stock, which in turn was used to acquire bank loans. Then the stock was sold by the defendants for their own benefit. In 1972, Rosenberg allegedly realized $1.9 million by selling 80,300 shares of Mattel stock, and Ruth, acting as a trustee for her children, took in $383,000 from the sale of 16,600 shares. The two were also accused of hiding real data from Arthur Andersen and of altering royalty statements, inventory records, and tooling costs. And in one of its most unsettling passages, the indictment stated that to increase 1970 profits, Rosenberg and Ruth actually discussed withholding $2.6 million of Mattel's contribution to its employee profit-sharing trust, though it doesn't say whether the two implemented their devious plan.
"I . . . will exert every ounce of strength at my disposal to prove my innocence," Ruth vowed when indicted, but ten months later she pleaded no contest. In December 1978, U.S. District Court Judge Robert Takasugi sentenced her to a forty-one-year prison sentence and a $57,000 fine, both of which he suspended. He did, however, require that she devote five hundred hours per year for five years to community service and pay $57,000 in "reparations" to fund an occupational rehab center for convicted felons. Ruth does not seem to be the sort of woman to run away from a fight. But she did.
"I did fight it for years and years," she told me, "but what happened is I went into retirement in 1975 and I hated it. I was as low as a person could get emotionally, psychologically. And I was having trouble finding a breast prosthesis. So I got into the business. In 'seventy-six, I was designing the product and in 'seventy-seven, I was marketing the product—running around the country doing promotions. And my lawyers kept calling and saying, 'You have to appear in court.' I'm on a crusade to correct the world— to change the world as it relates to the mastectomy—and every time I turned around they wanted me."
Ruth and her staff, mostly women who had lost breasts to cancer, held fitting sessions at department stores. They played tapes of Ruth on television, opening her shirt and asking interviewers if they could tell which breast was real. "We were dignifying the fitting process," she said. "Women would see dozens of other