MARTHA STEWART LEAVES COURT WITH LAWYER AFTER BEING FOUND GUILTY IN NEW YORK
Jeff Christensen  /  Reuters
Martha Stewart and lawyer Robert Morvillo leave federal court.
By
Dateline NBC
updated 3/5/2004 8:08:00 PM ET 2004-03-06T01:08:00

Reporters came running down the courthouse steps in a frenzy of signs and signals, scrambling to announce the news of the verdicts. Many were waving different numbers to correspond to the different charges in the case. There was momentarily confusion about who'd been convicted of what, until finally, it was all sorted out.

Martha Stewart was found guilty on all counts -- of obstruction of justice, conspiracy, and making false statements. Her stockbroker Peter Bacanovic was found guilty, too, of perjury, obstruction, and conspiracy,  but acquitted of one lesser charge of making a false document.

NBC News correspondent Ann Thompson was in the courtroom when word came that the jury had reached a decision. 

Thompson: “Hearts raced, people stood up, tension was truly palpable, when a verdict was said to be reached , you could see the tension building. But because the jury didn’t look at Martha, we all looked at each other and said this is not going to be good for Martha Stewart.”

But Stewart braved the moment as she has throughout, by sitting impassively.

Thompson: “She just stood there and didn’t show a trace of emotion. That's how she was during the whole trial.”

Her daughter, Alexis, who'd accompanied her mom almost every day of the five-week trial, put her head down when she heard the guilty verdict, and wept.

Thompson: “When judge said count 1, you could hear this gasp. No one could believe it, no matter how you thought the trial was going, that this would be happening to this woman who is one of the biggest celebrities in this country of making false statements.”

Vanity Fair correspondent Dominick Dunne, a close friend of Stewart's, also was in court when the verdict was read.

Dominick Dunne: “Peter Baconovic's mother got very excited and angry and teary and they were quieting her down and it was a very dramatic moment for me and a very sad moment, because I think this is a woman who has done great things in her life and you know, to see her brought down like this, this is a humbling act.”

Martha Stewart is scheduled to be sentenced in mid-June. The sentencing judge has a fair amount of discretion. Still, it's believed that the guilty convictions mean Martha Stewart, America's premiere homemaker and a woman whose marketing genius brought her fame and fortune beyond her wildest expectations, will likely face some jail time.  She faces a maximum sentence of 20 years, although that's considered unlikely.

NBC’s Dan Abrams: “Martha Stewart likely faces between a year and two years in prison. It is possible she could get probation. Most people think that that is unlikely in this case.”

A short time after the verdicts were announced, Martha Stewart emerged from the courthouse, still look unruffled but ignoring reporters pleas for a comment. She did however release the following statement:

"Dear friends, 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.”

Robert Morvillo (Stewart defense attorney): “We look at this as having lost the first round…we are confident that once we get our day in the court of appeals, the conviction will be reversed and Martha Stewart will ultimately be determined to have done anything wrong.”

The verdict vindicates the government's prosecution of Stewart, which was often lampooned for spending so much and taking so long to bring her case to court. Government lawyers said again today that nobody is above the law.

Prosecutor David Kelly: “Let this case and all of those cases send an important message: that we will not and frankly cannot tolerate dishonesty and deception in any sort of official proceeding especially ones such as these that can affect such a wide range of interests, both business and personal, across the country.”

Chappell Hartridge was the lone juror who spoke Friday -- here's what he told Dateline's Chris Hanson:

Hartridge: “We made up our minds as soon as we went into the jury room that we were going to take our time. We were going to make sure that we make the right decisions. We asked for a lot of the testimony to be read back to us. We wanted to hear the tape again. So we wanted to make sure that we were making the right decision. We didn't jump to anything quickly.”

The central issue at the trial: Did Martha Stewart lie about her reasons for dumping nearly 4,000 shares of a biotech stock just before bad news about the company became public? It all happened more than two years ago, just after Christmas, 2001. Stewart was headed to Mexico on vacation and the company ImClone was headed for trouble

Stewart's friend and ImClone CEO Sam Waksal, found out that the company's promising experimental cancer drug wasn't yet going to get FDA approval. Waksal tried to dump his shares before the news, sure to send ImClone stock plummeting, got out.  He was later convicted of insider trading. That same day, Martha Stewart sold all her shares  -- for about $230,000 -- after hearing from the office of Peter Bacanovic, the Merrill Lynch broker she and the Waksal family shared.

In a recorded interview with the Securities and Exchange Commission, Bacanovic denied under oath ever getting word to Martha Stewart that Sam Waksal was rushing to sell off stock.

Bacanovic audio tape: "I did not get to be a first vice-president at Merrill Lynch by discussing other's people's and by being indiscreet."

But an underling at the office, Bacanovic's own assistant Douglas Faneuil, testified at trial that his boss had done precisely that. The junior broker told the jury that on December 27, 2001, his boss had instructed him to alert Martha that Waksal was selling ImClone stock. Faneuil testified that he'd asked if he was allowed to do that and Bacanovic replied "You've got to. That's the whole point."

Prosecutors tried to prove Bacanovic was desperate to keep his celebrity client happy with his services.  They introduced an e-mail Stewart had previously sent to the broker about her investments:

“The account is a mess… I think it's time for me to give my money to a professional money manager who will watch it when I am too busy and will take a bit more care .... I’m none too happy."

CNBC's Ron Insana: “It's not easy to be charged with watching someone's money. You are responsible every day for the financial future of all your clients, and if you make a mistake, it costs them money.”

Both Bacanovic and Stewart insisted to federal investigators that they had a pre-arranged agreement to sell if ImClone shares dipped to $60 -- what's known as a stop loss order. Bacanovic produced a work sheet as evidence, with the notation "@60" scribbled next to ImClone. But a government expert said the ink used to write "@60" was different from all the other ink on that page. On cross examination, however, he could not say when that notation had been made

Insana: “whether or not there was an attempt to write that stop loss order in after the fact is and was a critical element in the case.”

Also implicating Martha Stewart was her own assistant, who testified that four days before she was to be questioned by federal authorities, Martha sat down at the secretary's desk and altered the description of the phone message she'd received from Bacanovic on that fateful December day. Originally, it had said the broker "thinks ImClone is going to start trading downward." The secretary, Ann Armstrong, said Martha replaced this to say the broker had called her "re Imclone,” a much more innocuous notation.

Insana: “It just looks suspicious, whether or not it really is.”

And in fact it made a big impression on the jury, according to member Chappell Hartridge.

Hartridge: “That was very strong. Because that was Martha's way of covering up what messages Peter left. That was very strong.”

And in fact it made a big impression on the jury, according to member Chappell Hartridge:

Hartridge: “That was very strong. Because that was Martha's way of covering up what messages Peter left.  That was very strong.”

An emotional Armstrong went on to say her boss abruptly ordered her to put the original language back.  Four days later, when she was questioned, Martha Stewart allegedly told investigators she "didn't know" if there was a written record of the phone message.

Her journey through the criminal justice system has marked an almost unbelievable turn of events for a woman who was once unstoppable, with her own television show, magazine and line of products, Martha Stewart embodied perfection, selling a life one might aspire to. It’s been a career planted in her own basement kitchen, and one which blossomed into a multimillion dollar media empire.

Stewart was a regular in New York City's most glamorous social circles, and one morning in 1999, she took her company Martha Stewart Living Omnimedia public, making her, on paper anyway, a billionaire in just a few short hours. A woman who had managed to succeed in a man's world and by doing so, she may have ruffled quite a few feathers along the way. 

Rita Haley: “How often do you hear complaints about a man who's supposed to have complete control being controlling?”

Rita Haley is the president of the New York Chapter of the National Organization for Women. She says Martha Stewart's rise to fame and fortune was threatening to some and that it was a cheap shot going for this woman when her actions are compared to those of the boys from those other big companies.

Haley: “There's this big furor about what Martha Stewart did, which probably affected no one except Martha Stewart . And where's the furor about Enron and about WorldCom, when what was done with Enron has affected thousands of people

Insana: "Something about how ultimately this case was about the feds showing that it is a level playing field out there. They can't let anyone get away with anything, even Martha Stewart.”

Diehard Martha Stewart fans stood by her, both outside court and inside, as celebrities such as Rosie O'Donnell and Bill Cosby arrived to show their friend support. In their closing arguments, Ms. Stewart's attorneys told the jury that Martha and her broker were far too smart to have acted as dumb as prosecutors contended they had -- and they called the government's star witness, that junior broker Faneuil "the living embodiment of reasonable doubt."  

While Stewart herself never testified, she told fans on her website that she was optimistic she'd soon be exonerated and allowed to return to the work of promoting creative home-keeping ideas. But it was not to be.

While she's apparently continuing the fight, Friday's verdict means Martha Stewart will likely have to resign from the company she founded all those years ago.

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