Archive for Saturday, March 6, 2004

Jury convicts style maven Stewart

Homemaking mogul found guilty of obstructing justice but maintains innocence, promises appeal

March 6, 2004

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— Martha Stewart was convicted Friday of obstructing justice and lying to the government about why she unloaded her ImClone stock just before the price plummeted -- a verdict that could send her to prison and cripple the homemaking empire built around her vision of gracious living.

Her ex-stockbroker, Peter Bacanovic, also was found guilty in the stock scandal.

Stewart, 62, grimaced and her eyes widened slightly upon hearing the verdict, and she later released a statement maintaining her innocence and promising an appeal.

The woman who built a reputation as a steely perfectionist and a ruthless executive walked out of the courthouse stone-faced before being driven away in a sport utility vehicle as supporters shouted, "We love Martha!" She will remain free while she awaits sentencing June 17.

"Maybe it's a victory for the little guys who lose money in the market because of these kinds of transactions," said juror Chappell Hartridge.

He and the three other men and eight women on the jury deliberated over three days before finding Stewart guilty on all charges: conspiracy, two counts of making false statements and obstruction of justice.

Bacanovic, 41, was convicted of conspiracy, perjury, making a false statement and obstruction of justice, but was acquitted of making a false document.

The charges carry up to 20 years in prison for both Stewart and Bacanovic. The judge could potentially sentence the pair to time in a halfway house or home confinement, but legal experts have said the term would probably be reduced to roughly a year in prison under federal guidelines. Each charge carries a maximum sentence of five years and a $250,000 fine.

The charges centered on why Stewart dumped about $228,000 worth of ImClone Systems stock on Dec. 27, 2001, just a day before it was announced that the Food and Drug Administration had rejected ImClone's application for approval of a cancer drug. The announcement sent ImClone's stock sharply lower. The drug eventually won government approval.

Stewart and Bacanovic claimed they had a standing agreement to sell when the price fell below $60. But the government contended that was a phony cover story and that Stewart sold because she was tipped by her broker that ImClone CEO Sam Waksal was frantically trying to dump his own holdings.

Waksal later admitted selling his stock based on advance word of the FDA decision. He is serving seven years in prison for insider trading.

Stewart, who averted more than $51,000 in losses by selling when she did, was not charged with insider trading; instead, she and her broker were accused of lying about the transaction and altering records to support the alleged cover story.

Stewart was easily the most recognizable face in the government crackdown on corporate crime that began with the collapse of Enron in 2001. Stewart's supporters claim she was being targeted because of her celebrity status.

Stewart made herself into the nation's premier homemaker by way of magazines, TV programs and everything from cookie cutters and garlic presses to bedsheets and pillows.

In a statement on her Web site, Stewart said: "I am obviously distressed by the jury's verdict but I continue to take comfort in knowing that I have done nothing wrong and that I have the enduring support of my family and friends. I will appeal the verdict and continue to fight to clear my name. I believe in the fairness of the judicial system and remain confident that I will ultimately prevail."

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