It was late in the fourth quarter at Madison Square Garden on March 24 and the New York Knicks and the Toronto Raptors had everything to play for. With only two minutes and 11 seconds to run, the Knicks were leading 96-86 when an elderly man wandered along the side of the basketball court and grabbed the arm of the Knick's swingman, Latrell Sprewell, just as he was about to pass. Sprewell was stunned. "He was trying to say something but he was just mumbling," he explained afterwards. "I wasn't nervous but I was a little surprised. Like, is security going to come over here at some point or what?"

Two security guards did arrive, and gently escorted Calvin Klein, global brand and one of the most famous names in fashion design, back to his seat.

Even to those accustomed to Klein's unpredictable behaviour, the incident came as quite a shock. There had been rumours that his old demons had returned to knock him off the wagon - sightings of him drinking around town and looking unnaturally vacant at parties. But nothing on this scale. "It's surprising to me," says Lisa Marsh, former fashion business writer for the New York Post and now writing a book, House of Klein: Fashion, Controversy and Obsession. "For someone who has been so concerned about their image for the past 30 years to get so out of control so very publicly was not something I would have guessed at."

Klein did move swiftly after the event to admit his relapse and pledge redemption. "For many years I've been able to successfully address my substance abuse issues, which for anyone is a lifelong process, through strict adherence to counselling and regular attendance at meetings," said the 60-year-old in a statement.

"However, when I recently stopped attending meetings regularly, I suffered a setback. Fortunately, I was lucky, with the help of others, to recognise the problem. And now I'm again getting the treatment I need to resume a healthy and productive lifestyle."

But since that night three weeks ago, both the fashion world and New York's beau monde have been buzzing with two questions. What has happened to Calvin Klein the man? What went wrong with the reformed vodka and valium addict who emerged from a treatment centre in Minnesota 15 years ago, apparently cured and claiming: "I'm in the first year of my second life. I feel reborn. I really am seeing things differently."

And what impact will his very public relapse have on Calvin Klein the brand? Can a name which sells millions of dollars' worth of jeans, perfume and underwear worldwide survive the sight of its namesake stumbling around public places in a state of inebriation?

For Klein, like Oprah, Ralph Lauren or the domestic diva Martha Stewart, market not only what they do but, far more importantly, who they are. In good times this works well. With several magazines, a syndicated television programme and her own product lines, Stewart - America's answer to Delia Smith - has used her name to make millions. But when it emerged last June that she was under investigation for insider trading her business fortunes suffered a severe blow. In November, her company, Martha Stewart Living Omnimedia, reported a 42 per cent drop in profits while its stock market value fell dramatically.

"A brand is a statement of trust between a company and a consumer," says John Stanton, professor of marketing at St Joseph's University in Philadelphia. "When it comes to someone like Calvin Klein you're selling an image. You can't argue that Calvin Klein products, which bear his name, have nothing to do with Calvin Klein the person, when people have bought them precisely because they trust the name. That doesn't make sense."

Stanton has a point. Once people start branding themselves then, potentially, every aspect of their life becomes commodified. And if the personal is profitable it follows that it can lose money too. None the less, Klein may be more able to divorce himself from his brand than, say, Stewart because while Klein's name is associated with his clothes, his face is not. Moreover, in recent times the man who bears the name has become increasingly divorced from the name itself. The image has dwarfed reality. "The brand," says Marsh, "is bigger than his name."

His company, Calvin Klein Inc, was bought by Phillips-Van Heusen, the nation's biggest shirtmaker, in December for $400m (£254m) in cash, plus $30m (£19m) in stock and up to $300m (£191m) in royalties tied to revenues over the next 15 years. The nature of Klein's role has been unclear. At the time of the sale, Bruce Klatsky, chief executive officer of Phillips-Van Heusen, said that Klein would be involved in design, but have no title. In February, he said Klein would have the title of "consulting creative director".

According to the latest edition of W, the American fashion magazine, he sent a memo to his staff confirming his new role as a consultant but making it clear that the creative responsibility would now be Klatsky's. A week after the February shows he moved his personal office and assistants out of his corporate headquarters.

It signalled what is probably the final chapter of a stunning career. "His contribution to the fashion world has been immeasurable," says John Mincarelli, professor of fashion merchandising at New York's Fashion Institute of Technology. "He revolutionised the underwear business. He made minimalism work for Americans. He really pared it down."

Marsh agrees. "His designs were chic, simple and accessible. He managed to take some of what he had on the catwalk and translate it into a $60 pair of jeans. He took a designer dream to ordinary people."

But soon Klein became better known for his advertising than his couture: his commercials showed apparently pre-pubescent teens in sexually loaded poses and rakish, wan models who looked as if they were on drugs. When 15-year-old Brooke Shields appeared on television in 1978 asking, "You know what comes between me and my Calvins? Nothing," commentators asked whether Klein was sick or a genius. Either way, he was successful. The controversy boosted sales, with 200,000 pairs of the jeans bought in the first week they hit the market. When his name appeared on the waistband of men's underwear in an advertising campaign showcasing near-naked men, many magazines refused to run the ads. Sales boomed.

A decade later it was his use of androgyny in his advertising and his unisex fragrances, that would bring his name to the fore. When parent-led anti-drug groups called for a boycott of Klein products to protest against the glamorisation of "heroin chic" the cash tills kept on ringing. With each new success he cemented himself more as a marketing genius who could package, promote and popularise a zeitgeist than as a master of couture.

This is why some believe his most recent escapade will have little effect on either his or his brand's fortunes. "It won't affect sales. Infamy has been the key to his success," says Mincarelli. In the late 70s and early 80s, when he was a bad boy among the brat pack during New York's disco days, Klein's indiscretions were a badge of honour and an implicit element of the brand. Along with Andy Warhol, Bianca Jagger and Brooke Shields, he would party hard at Studio 54 in midtown Manhattan. In an interview with Playboy in 1984, he said: "Anything I've wanted to do I've done. Anyone I've wanted to be with, I've had."

The image was hot, even if some believed the clothes were losing their lustre. "He has never been one of those great designers who keeps coming up with exciting new collections and who keeps perfecting and developing," says Mincarelli.

"Whatever his title is now, says Marsh, "it clearly is not a full-time job." Some put Klein's indiscretion down to boredom. "He's rich, he's famous, he's in New York and he's got nothing to do. He's gonna end up on drugs," said one gossip columnist.

His name is increasingly better acquainted with perfumes - to which he franchises his name - than jeans which, in any case, are now manufactured by someone else.

But despite the infamy, few could put a face to the name. During the 70s, says Marsh, he turned up in a store in New Mexico to promote his goods and nobody knew who he was because they had no idea what Calvin Klein looked like. "Most people in Asia and Africa who buy his clothes don't know that there is a designer behind the name," says Marsh. "They think it's just a label."

Indeed, Sprewell had no idea who the man pestering him on the court was. Search for Klein's image on Google and you will be presented with perfumes and underpants before you get an actual view of the man.

Amelia Torode, of the Headlight global consumer trends and brand consulting firm, believes Klein's relationship to the products is so complex and tenuous that the effects of his recent indiscretion and ongoing battle with addiction are unpredictable. "He could actually try and turn this to his advantage," she says, explaining the trend of "the transparent society". The logic goes that with multifarious information sources and a less prescriptive popular culture, famous people's misdemeanours are well known. The issue then is not whether the famous have weaknesses, but how they deal with them publicly. "The comeback can be a way of cementing a relationship with the American consumer," says Torode. "They like people fighting with inner demons."

She thinks the bad boy image would have had more currency if he were 20 years younger. Today in a city where smoking in bars is banned and HIV is widely recognised as a global killer, such hedonism does not carry quite the same cachet. Nor, in an increasingly age-conscious society, would it sound like such a cool life-philosophy from the lips of a 60-year-old. "Age-snobbery is quite a big factor," says Torrode. "If he'd done this when he was 40 people might have thought it was witty and eccentric, but as an older man it looks a bit sad. It looks like he can't take it any more."

For the namesake of a brand aimed at the young and athletic, that could be fateful. But there is a third possibility: that what is bad news for the man may not have any impact on the merchandise. "It could be that he is so dissociated from the brand that it actually doesn't really have any effect on the sense of exclusivity that is supposed to come with Calvin Klein products, because nobody associates them with him anymore," says Torode.

"The fashion industry is very fickle," says Mincarelli. "What people really care about is what sells."

As long as business was good, Klein's wayward image was regarded as the excesses of a creative genius in an industry where excess is lauded and at a time when excess was fashionable. But the 80s caught up with him in terms of both debt and health. By 1991 he and his childhood friend and business partner, Barry Schwartz, had long-term debts of $54.6m.

In 1988 he checked himself into a rehabilitation centre in Minnesota and returned a changed man - which would ultimately mean a changed brand. When he went in, his signature fragrance was Obsession. Not long after he came out, Eternity was released. He was a married man in a New York townhouse, settling down to sobriety. "I don't think the thing to be is provocative any more," said Klein. "I've done everything I could do in a provocative sense without being arrested."

But back then there was considerable personal and professional attachment to the thing that made him famous. When ABC's anchorwoman Barbara Walters asked him why his sportswear division wasn't doing well in 1991, he said: "I think because it needs my personal touch more."

More than a decade on, people want him to endorse products, not make them. In marketing terms - the harsh rules by which he has lived well for the last few decades - what he was matters. What he does is of little interest as long as it does not devalue the brand he has so carefully promoted. This puts Klein in something of a bind, albeit a lucrative one. He is a prisoner of his own image.

"If someone gave me millions of dollars I would want to go out and do my own thing," explains Marsh. "But he can't. He carries the name he has just sold."