by M. G. Lord
Barbie's fate in the early seventies was very closely linked with Ruth's. Barbie's values were Ruth's values, and the risk Ruth took by introducing Barbie had paid off handsomely. But in 1970, Ruth's luck changed. "I had a mastectomy and the world started to fall apart," she said.
Back at work two weeks after the operation, Ruth had her hands full. While Elliot handled Mattel's creative side, Ruth attended to its business and financial aspects, which, ten years after the company went public, had expanded well beyond toys. In 1969, Mattel acquired Metaframe Corporation, a manufacturer of hamster cages, aquariums, and other pet supplies. Not satisfied with small animals, in 1970 it moved to larger ones—lions, tigers, and bears—by acquiring the Ringling Bros, and Bamum & Bailey Circus. It bought Audio Magnetics Corporation, a manufacturer of audiotape, and Turco Manufacturing, a maker of playground equipment, and it formed Optigon Corporation, a distributor of keyboard musical instruments.
It even got into the movie business, forming Radnitz/Mattel Productions, Inc., which produced the Academy Award-winning Sounder.
Mattel's goal in diversifying was to retain some sort of equilibrium. Toys are a volatile, seasonal business; by acquiring stable companies with stable sales, Mattel hoped to offset the capriciousness of the toy market. It also began accounting practices that would even out its earnings vacillations, such as "annualization," the deferring of some of its expenses until late in the year when most of its sales took place. Before beginning its diversification, it brought in two key outsiders: Arthur Spear, an MIT engineering graduate who had headed manufacturing operations at Revlon; and Seymour Rosenberg, a financial expert who had earned a reputation as an acquisitions wizard at Litton Industries.
Despite all this, 1970 was as bad a year for Mattel as it was for Ruth. Its Talking Barbies were silenced when its plant in Mexicali, Mexico, where they were made, burned. And when its Sizzler toy line—a subsidiary of Hot Wheels—failed to generate as much revenue as Mattel had predicted, the company simply overstated its sales, net income, and accounts receivable, and instigated a "bill and hold" accounting practice—invoicing clients for orders that, because the clients had the right to cancel and often did, were not shipped. The inclusion of these "bill and hold" sales increased reported pretax earnings by about $7.8 million. Had Mattel made a miraculous recovery—which, given the unpredictability of the industry, was not impossible—its borrowing against future sales might have gone unnoticed. But as the company weathered bad quarter after bad quarter, the gap between the business it reported and the business it did widened.
By 1972, it could no longer disguise its losses. It reported a $29.9 million loss on sales of $272.4 million; and Wall Street, which had embraced Mattel as a glamour stock, began to suspect that something was rotten in Hawthorne. In August, Seymour Rosenberg, executive vice president, left; his acquisitions had been losers and his accounting practices were getting Ruth into hot water. Meanwhile, Mattel's bankers, worried about their short-term financing, had been having independent discussions with operations manager Arthur Spear. In December, they refused to deal with Ruth any longer; she was permitted to retain the title of president, but forced to relinquish control of the company to Spear.
In February 1973, Mattel's internal drama became public farce. The company issued contradictory press releases within three weeks. The first predicted a strong recovery; the second said: Forget the first; we just happened to have overlooked a $32.4 million loss. When, as a consequence of the announcement, Mattel stock plummeted, its shareholders filed five class-action lawsuits against the company, various current and former officers, and Arthur Andersen & Co., its independent accounting agency. The Securities and Exchange Commission also began an investigation.
Ruth, forced to resign as president (but allowed to continue with Elliot as cochairman of the board), was publicly repudiated, stripped of her power. Shaken, she lost faith even in Barbie.
"There's a group of people in this company that says Barbie is dead," former Mattel executive Tom Kalinske recalls Ruth telling him in 1973. "Last year we had our first decline ever since the introduction of Barbie. People are saying that Barbie's over, finished, and that we ought to get on to other categories of toys." Shocked, Kalinske responded, "That's the most ridiculous thing I've heard. Barbie's going to be here long after you and I are gone." Moved by his enthusiasm, Ruth made him marketing director on the line.
"Ruth was an incredible woman . . . a great marketing person and a great finance person," Kalinske told me at Toy Fair in 1993. "But she had these years of success where everything went correctly for her. Every quarter, earnings would be up, sales would be up—and it just kept going that way for years and years. Then she had a quarter where that didn't occur. So she ended up relying on some inside financial and sales people who basically advised her, 'Don't worry about this. . . . This is a momentary problem, a calendarization problem.' Well, needless to say, after three quarters of it not getting any better, she had committed fraud—or the company had, and as the leader of the company she had. So there were extenuating circumstances, but nevertheless she was responsible for having reported sales and earnings that didn't exist."
Ken Handler sees it differently. "[My mother] was hated because she was a strong, powerful woman," he told me. "Men that work in these kinds of organizations . . . bring a tremendous amount of unresolved sexual energy to the workplace. These men were not able to sit back and take that much strength from a woman. And my mother wasn't very diplomatic always; she could be very tough. So they resented her deeply, and they conspired against her in her absence."
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, howe
ver, 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 women milling around waiting to be fitted, and they'd have their own little jam sessions. . . . They'd talk to each other and it became a party to these gals, a fun experience. By the time they got fitted, they were walking with their chest out; they were feeling each other; they were laughing. Imagine women going around and feeling each other's breasts—publicly— and laughing and kidding around."
But, she continued, "I had to come home to this other life of fighting the lawyers. . . . So one day I said, 'Do something. Get it changed. . . . There's got to be another way.' "
Her lawyers suggested that she plead nolo contendere, but warned that it was the equivalent of pleading guilty, except that it couldn't be used against her in subsequent civil suits. "I won't plead guilty," she told them, "I'd like to plead nolo contendere. . . . I'll accept [the court's] version of guilty, but I want to say when I plead that I'm innocent." You can't do that, one lawyer said, but a second thought it was possible. "And sure enough they looked it up and there was a precedent," Ruth said. "I could plead nolo and at the same time protest that I'm innocent and get away with it." Which she did.
Ruth's biography is so much larger than life that over the course of our interviews, I felt as if I were in a TV movie—some sort of courtroom drama, or HBO's Barbarians at the Gate. The tone and direction, however, changed from scene to scene. Ruth was a sentimental Frank Capra heroine one minute, a John Waters character the next. Part Leona Helmsley, part Joan of Arc, Ruth is an almost impossible blend of acquisitiveness and idealism.
Words often came to Ruth in the form of slogans and catchy product names, which gave our talks the flavor of a TV commercial. She is proud of her three best-selling prostheses—the "Nearly Me Three," her "classic best breast"; the "So-Soft," an all-silicone breast for "women who need the softer, more hanging look"; and the "Rest Breast," an all-foam breast that can be worn while swimming. Nor did she manufacture breasts merely as a service; as early as 1977, Nearly Me, a privately held company (no messy filing with the SEC), which she sold to Kimberly-Clark Corporation in 1991, did a million dollars' worth of business.
"There are breasts and there are breasts," she told me between bites of an egg salad sandwich at Beverly Hills' Hillcrest Country Club in 1992. "Some breasts are much softer and some breasts are much firmer. Some have a tendency to lift up and be full; others have a tendency to lift up and hang down. It depends on the muscles and the age and the construction and the body."
Ruth tends not to look at the whys of things; but she misses no detail when it comes to the hows. She figured out what male prosthesis makers had overlooked: breasts, like feet, come in "rights" and "lefts," as must prostheses. To implement her discovery, Ruth formed Ruthton, the precursor of Nearly Me, with Peyton Massey, a Santa Monica-based prosthesis maker. "After he gave me all the reasons why it wouldn't work, he agreed that he would do it," she told me. "We cleared out an old storeroom at his place . . . and he sculpted the breasts and I did all the other stuff to make it happen."
Ruth was unhappy with Massey's materials—the early prostheses had "a very peculiar odor," she recalled—so she brought in a half-dozen retired Mattel toy and doll designers to revise them. She wanted the breasts to be "lightweight" and to have "a swoop on the top and a fullness on the bottom." She also wanted "some kind of a 'skin' to wrap around—to hold all of this together." Within a couple of hours, the toymakers determined that Ruth's needs could be met by a model with a foam back, a silicone front, and a polyurethane "skin."
"Thirty years of working at Mattel had trained me to know what is needed if you want to design a product," she explained. It also taught her how to sell one. In January 1977, she arranged her first department store promotion at Neiman Marcus in Dallas. Her goal was to get out of Los Angeles and see how the breasts played in a less trendy part of the country. The merchandise manager was at first taken aback. But after Ruth delivered her pitch face-to-face, Neiman Marcus opened its doors.
"I don't want all the stores," Ruth told the merchandise manager. "Pick the one in your most affluent Jewish neighborhood, because there's a high degree of breast cancer among Jewish people . . . and get me some publicity."
"Some publicity" quickly turned into appearances on talk shows across the country. While her staff sent handwritten invitations to mastectomy victims near each host store, she stripped off her shirt for People magazine and invited a New York Times reporter to feel her breasts. Nearly Me became a phenomenon. Although some mastectomy patients in the mid-eighties chose to have their breasts surgically remade, their numbers weren't large enough to affect her business. "I was negative as hell on breast reconstruction at the beginning," she explained. "Because they reminded me of the early prostheses. They didn't match the other side. Women showed me . . . their own breast down here and the artificial breast up here—hard as a rock up here." She gestured to a spot near her shoulder. "I saw hundreds of those. Out of place. Crazy locations. If when you put a brassiere on, the two sides don't match, what the hell have you got?"
For most of the sixteen years that Ruth ran Nearly Me, she traveled two weeks out of every four. During the five years after her sentencing, however, she had to give community service at home—taking poor kids to her beach house in Malibu and setting up the Foundation for People, an agency that enabled white-collar felons to help blue-collar felons learn skills and get jobs.
"After I got the swing of it, I turned that into a positive thing and we formed a positive group," she said. "We rented a floor in an old rundown hotel and I got my personal decorator to do the whole floor for free. . . . I think white-collar offenders in most cases have been punished enough by the time they get to the sentencing. The humiliation is worse than going to jail. And the comedown from where they've been is so great—it's like you've already shot the guy, now stab him. What you need to do to help society take care of itself is say, 'Okay, buddy, it's your turn now to turn society around—to devote your money to it and help it.' "
Ruth's foundation enjoyed great success in the early eighties but was later disbanded. When Michael Milken and Ivan Boesky were sentenced, public sentiment turned against the idea of permitting white-collar criminals to elude jail.
WHILE RUTH REHABILITATED FELONS AND CANCER PA-tients, the plastic doll she invented helped Mattel recover from its near collapse. If Barbie was distraught during Ruth's run-in with the law, she didn't show it. There was no Day-in-Court Barbie or Barbie-for-the-Defense. She kept active; her "Busy" incarnation had clawlike hands; she could pick up such leisure-time paraphernalia as a phone, a TV, a record player, a serving tray, and a suitcase. She kept fit; her "Live Action" and "Walk Lively" versions twitched and strutted. And in an incarnation that featured the Twist 'N Turn face with a dead-on stare, she celebrated her sixteenth birthday.
Mattel also kept up its jibes at the women's movement. In 1968, feminists protested the Miss America Pageant; in 1972, the comp
any introduced an official Miss America doll. A year later, it came out with "Barbie's Friend Ship," a plastic airplane-cum-carrying case that featured—lest girls get any inflated ideas about taking the controls—a painted-on male pilot. A similar plane was issued with "Big Jim," a boys' line of Schwarzenegger-bodied, flannel-shirted, fire-fighting, construction-working, alligator-wrestling male dolls, so cartoonlike in their virility that they resembled the Village People, the ultramasculine gay disco recording artists. The cockpit of Big Jim's plane, however, was designed to hold Big Jim.
Then, in 1975, Skipper grew up, or, in any event, sprouted breasts. Growing Up Skipper, as the pre- and post-pubescent doll was called, required two wardrobes: one innocent, featuring strapless Mary Janes and knee socks; the other sophisticated, featuring grown-up, seventies platform shoes. It also required from its owner a taste for the macabre: Even in the Mattel catalogue the child photographed with it looks wide-eyed and aghast. The doll squeaks and lurches as its bosoms pop out, then, after another turn of its arm, snaps back into flatness. Growing Up Skipper slipped into production while men managed the Barbie line. Earlier Barbie products had reflected a sort of sly, knowing, conspiracy-of-women approach to the mysteries of femininity. But Growing Up Skipper is a male interpretation of female coming-of-age, focusing not on the true marker of womanhood— menstruation—but on a tidy, superficial change.
Steve Lewis defended the doll as "educational," but because it sidesteps what Joan Didion termed "that dark involvement with birth and blood and death," it doesn't teach biology. Rather, it is about signaling one's grown-up status to men through clothing. For many real-life females, becoming a woman is a messy, bloody, harrowing event. It is also nonreversible; only a small minority of anorexics and athletes manage to turn it back. But for the doll, the transition is a lark; no muss, no fuss, and an open invitation to retreat. I was heartened, however, to learn that not all the men who worked on Growing Up Skipper approved of it. "That thing was grotesque," said Mattel chief of sculpture Aldo Favilli.