'Hardball with Chris Matthews' for July 16

Guest: Harvey Pitt, Michael Ramsey, Michael France, Michael Wolff

ANDREA MITCHELL, GUEST HOST:  Tonight, a defiant Martha Stewart is sentenced to federal prison.


MARTHA STEWART, SENTENCED TO FIVE MONTHS IN PRISON:  I hope the months go by quickly.  I‘m used to all kinds of hard work, as you know, and I‘m not afraid.  I‘m not afraid whatsoever.  I just very, very sorry that it‘s come to this.


MITCHELL:  Did Martha get a raw deal, or has justice been served?

This is HARDBALL.  Good evening.  I‘m Andrea Mitchell, in for Chris Matthews.

Domestic diva Martha Stewart sentenced to five months in federal prison and five months of home confinement for lying to federal investigators about a stock-trading scan scandal.  But she was spared an immediate trip to prison pending her appeal.  Her broker, Peter Bacanovic, received a similar sentence.  After her sentencing, a feisty Stewart said she was not afraid to serve her time and vowed she would be back.  NBC‘s Anne Thompson has this report.


ANNE THOMPSON, NBC CORRESPONDENT (voice-over):  On what she called “a shameful day,” Martha Stewart left the federal courthouse with a lenient sentence, prison and home confinement, composed but bitter about her two-and-a-half-year ordeal.

STEWART:  I have been choked and almost suffocated to death during that time, all the while more concerned about the well-being of others than for myself.

THOMPSON:  Inside, a more emotional Stewart used those exact same words to plead for leniency from Judge Miriam Cedarbaum.  Stewart choked back tears as she urged the judge to remember “all the good I have done” and begged “to get on with what I always thought was a good, worthwhile, exemplary life.”  But Stewart did not apologize for lying to investigators about why she sold her ImClone stock, and outside seemed defiant.

STEWART:  I‘m just very, very sorry that it‘s come to this, that a small personal matter has been able to be blown out of all proportion, and with such venom and such gore.

THOMPSON:  Her co-defendant and former stockbroker, Peter Bacanovic, also got five months in prison and five months home confinement.  Judge Cedarbaum told both lying to government agents is a very serious matter.  But to Stewart fans like Linda Smith (ph), who drove two hours to support her idol, it all seemed unjust.

UNIDENTIFIED FEMALE:  I‘m going to pray that she has an appeal and she doesn‘t spend one day in jail.  She doesn‘t deserve it!

THOMPSON (on camera):  Stewart will remain free while her lawyers appeal her conviction, an appeal that will focus on the alleged perjury of a juror and a witness, and the fact Stewart was in charge wasn‘t charged with insider trading.

WALTER DELLINGER, STEWART ATTORNEY:  The whole atmosphere of the trial was one about a crime that was never charged and never happened.

THOMPSON (voice-over):  But very few federal criminal convictions are overturned, and if Stewart does serve time, she asked that it be at a prison in Danbury, Connecticut, near her home.  Susan McDougal, who did time in federal prison on contempt charges in connection with the Whitewater scandal, says the toughest thing for Stewart would be the loss of control.

SUSAN MCDOUGAL, CONVICTED IN WHITEWATER INVESTIGATION:  She‘s going to have to cope with maintaining, in a sea of people who love chaos, who love a chaotic environment, who want to make it hard.

THOMPSON:  A determined Stewart insisted she and her homemaking empire would persevere.

STEWART:  And I‘ll be back.  I will be back.  Whatever I have to do in the next few months, I hope the months go by quickly.  I‘m used to all kinds of hard work, as you know.  And I‘m not afraid.  I‘m not afraid whatsoever.

THOMPSON:  A woman who made a career of domestic perfection, tonight her life is still unsettled, and her future still uncertain.

Anne Thompson, NBC News, New York.


MITCHELL:  So did Martha Stewart receive a fair sentence?  Harvey Pitt served as chairman of the Securities and Exchange Commission from 2001 to 2002 and is now the CEO of Kalorama Partners, a business risk assessment firm.

Mr. Pitt, was this fair?

HARVEY PITT, FORMER SEC CHAIRMAN:  I think it was fair.  It was at the low end of what the judge‘s discretion permitted, but I think the important thing is that Martha Stewart is going to jail for lying.

MITCHELL:  Well, a lot of people think that she‘s being treated unfairly because she didn‘t hurt anyone, she was lying, there wasn‘t any charge of insider trading.  You disagree.

PITT:  I disagree completely.  The effectiveness of the government depends on people telling the truth.  She had an alternative.  She could have refused to say anything to the government.  But once she spoke, she had to tell the truth.

MITCHELL:  But what is the real damage here?  This woman can no longer be the CEO of any kind of publicly traded company.  Even if she gets out and tries to rebuild her company, she can‘t go back.  I mean, she—her life is effectively ruined as a major business executive.

PITT:  Well, I think that is one of the factors that the judge took into account in imposing the five-month sentence.  But the importance here is that all citizens have to know that if you are questioned by the government, you must tell the truth.  And no matter how rich, how famous, how powerful you are, if you don‘t do that, you‘re going to jail.

MITCHELL:  Now, she described this as a, quote, “small personal matter.”  Explain to all of her fans out there why, in your view—a little bit in more depth—why this is not a small personal matter.

PITT:  It is most definitely not small and it is not personal.  What she did was lie to federal investigators.  That causes the government to have to expend more energy and more resources to find out the truth.  If everyone took that approach, the government‘s ability to protect innocent investors would grind to a halt.

MITCHELL:  You know, a lot of people would argue that this would not have happened had she not been a woman, and would not have happened if not for the political climate of corporate governance scandals, of Enron, all these other kinds of things.  And we‘re going to be talking a little bit later to one of the lawyers representing the Enron defendant.  But what is the real issue here, in terms of fairness, in terms of the political climate?

PITT:  Well, first, I think you have to start with the understanding that if the government had decided not to prosecute Martha Stewart, everyone would have said, You see?  If you‘re rich, if you‘re famous, you can get away with lying to the government.

MITCHELL:  I think you‘re absolutely right about that.

PITT:  Yes.  And so I think the government had absolutely no alternative here, but to pursue a high-profile case, where they had the goods on the particular individual.

MITCHELL:  I guess what I‘m trying to get at, though, did they just make an example of her?  Is this their way of saying, See?  We are going after these bad guys, even if the real bad guys are still yet to be prosecuted.

PITT:  Well, I think they are going after the real bad guys, and I think lying makes Martha Stewart a real bad person.  But I also believe that this is the best way for the government to get its message out.  Every citizen on the street and everywhere will understand that if you lie to the government during an investigation, you run the risk of going to jail.  That‘s the most powerful, effective message the government can get out.

MITCHELL:  Now, your field is securities law, but taking a step back, as an attorney, if you were her defense lawyer right now and she came out and she talked about “the venom and the gore” and she said this was just “a small personal matter”—she did not sound at all apologetic.  How does that affect her appeal?

PITT:  I don‘t think that that will have any technical impact on the appeal.  It may have a subtle effect because people are all individuals, and even judges look at the way a defendant conducts herself in public.  But I believe that it should have no bearing on the validity of any appeal she files.

MITCHELL:  The issues for the appeal, according to Walter Dellinger, who is her highly qualified appeals attorney—he was the solicitor general, he was an expert, he was in the Clinton administration, a law professor down in North Carolina.  He has argued so many cases before the Supreme Court.  What kinds of issues is he going to raise?  Are these the basic perjury issues on the part of the witnesses?

PITT:  I think his issues are going to deal with some of the jury problems that arose after the verdict, and I also think that he‘ll probably make an argument about selective prosecution.  That seems to be something that was pursued in the lower court, as well.  And I think on appeal, that will be one of their contentions.

MITCHELL:  What about the sentencing?  How tough a sentence could you have?  Under the sentencing guidelines, could it have been beyond 16 months, or was that the limit?

PITT:  I think she was restricted, based on the fact that the most onerous charge was deleted by the judge during the trial.  I think the maximum was 16 months.

MITCHELL:  And in giving her only five months—although it is a prison term, but it‘s only five months—was she trying to send a signal, the judge?

PITT:  I don‘t think so.  I think what the judge was trying to do was to balance fundamental fairness with respect for the technical aspects of the law.  Here‘s a situation in which five months is certainly permissible, and the judge took into account all of the other ramifications on Martha Stewart‘s life.

MITCHELL:  What did you think about her coming out and plugging her magazine and her business?

PITT:  Well, I—my own view is that while I may understand her doing it, that isn‘t the way I think most people would like to see her behave.  I think what she ought to have been doing is to show a certain amount of sorrow and remorse for what had taken place, instead of acting defiantly.

MITCHELL:  Yet you still don‘t think that that‘s going to affect her appeal.

PITT:  No, I don‘t think it will affect the outcome of her appeal.

MITCHELL:  You think that judges decide these things clearly on the merits, that they have no reaction to what‘s happening out there to all the mail—I mean, this judge has been getting tons of fan mail from Martha Stewart fans.

PITT:  I think that the judges are human beings, and to some extent, they can‘t help themselves but bring their own sense of values and approaches to this issue.  But when they decide the legal questions, they are going to be applying strict black-letter law.

MITCHELL:  OK.  Stand by for just a second.

PITT:  Sure.

MITCHELL:  We‘re coming back with more from former SEC chairman Harvey Pitt.  And later, the attorney for former Enron chairman Ken Lay will be joining us.  Plus: Martha Stewart says she will be back, but will the public accept her once she‘s served her time?  “Vanity Fair‘s” media columnist will be joining us.

You‘re watching HARDBALL on MSNBC.


MITCHELL:  We‘re back with the former chairman of the Securities and Exchange Commission, Harvey Pitt.

Mr. Pitt, do you think that the example of Martha Stewart will prevent other cases?  She wasn‘t charged with insider trading, but will it serve as a warning?

PITT:  First, I think it will serve as a warning.  And second, the SEC has charged her with insider trading.  She still has to respond to those charges, as well.

MITCHELL:  Well, let‘s talk about that.  She‘s got some civil cases up ahead.

PITT:  She has civil prosecution ahead of her, and I believe that that will be quite serious, in light of this conviction.

MITCHELL:  How does that work, though?  Does she serve her time and then face that when she gets out, or is it before she goes to jail?

PITT:  She‘ll serve her time, and then there‘ll be a trial, if she wants one.  In most cases, after a defendant has been found guilty of criminal charges, there‘s usually a settlement of some sort.  But she‘s not required to settle.

MITCHELL:  And the SEC is charging her with insider trading, but the federal prosecutors didn‘t.  Is that because the threshold to prove it is lower in the civil case?

PITT:  Yes.  The criminal charges would have required proof beyond a reasonable doubt, and in the civil case, it‘s just a preponderance of the vi.

MITCHELL:  Is she likely to also face shareholder lawsuits, as well? 

Are there any other things pending against her?

PITT:  I think that that‘s unlikely.  The number of shares she traded was rather small.  The amount of her profit was relatively small, by these standards.  So I thick think it‘s mostly the SEC and the ability of the SEC to bar her from ever serving as an officer or director ever again.

MITCHELL:  Now, what other kinds of penalties could she face, heavy fines?

PITT:  She can face fines.  She can face up to triple damages for her insider trading.  So it would be disgorgement of the profits and another three times penalty would be the maximum.  Plus, she can be enjoined from ever doing that again.  And she can be precluded from ever being an officer or director of a public company.

MITCHELL:  Did she do this to herself?

PITT:  I believe she did.  All she had to do was say, I‘m not going to talk to you without the presence of my lawyer, and none of this would have occurred.

MITCHELL:  Well, was it a case where she was trying to be cooperative?  I mean, who goes and sees a federal prosecutor without an attorney?  It‘s sort of boggles the mind that someone as sophisticated as Martha Stewart would do that.

PITT:  The—she had attorneys in most of the critical points.  But I think the bottom line is, if you‘re not going to tell the truth, you keep your mouth shut.  But once you open it, you have to tell the complete truth.

MITCHELL:  You know, do you think that there are other cases pending now already, such as the Enron case against Ken Lay, that will be at all affected by the way this played out?

PITT:  Well, I think there is some spillover effect.  This is a very bad time in our country to be a defendant in a criminal prosecution for corporate wrongdoing.  That‘s what this case establishes in no uncertain terms.

MITCHELL:  Do you think that juries are able to distinguish among defendants and really look at the evidence, or is there so much anger against corporate, quote, unquote “bad guys” that they just act very tough?

PITT:  Well, I think that there is a lot of anger, but I believe, in the long run, juries can make these distinctions.  Mark Belnick today, the general counsel of Tyco, was acquitted on all charges, which I must say came as a huge surprise to many observers, including me.

MITCHELL:  Not to his attorney, Reid Weingarten (ph), who was pretty confident all along this long trial.  But that was a pretty stunning verdict.

PITT:  I think it was a stunning verdict, and I think Reid Weingarten did an unbelievable job.

MITCHELL:  All right.  Well, we‘re going to be talking to other lawyers shortly.  But thank you very much, Harvey Pitt.  We appreciate your being here with us.

And much more to come on Martha Stewart‘s sentencing today.  When we return, the attorney for former Enron chairman Ken Lay, who was indicted last week.

You‘re watching HARDBALL on MSNBC.



STEWART:  I‘m not afraid whatsoever.  A small personal matter has been able to be blown out of all proportion, and with such venom and such gore.  I mean, it‘s just terrible.


MITCHELL:  Welcome back to HARDBALL.  Michael Ramsey is a Houston defense attorney who is currently representing former Enron chairman and CEO Kenneth Lay.

Mr. Ramsey, did Martha Stewart get what she deserved?

MICHAEL RAMSEY, KEN LAY‘S DEFENSE ATTORNEY:  Well, I think she should never have been tried.  If she‘d have been Jane Smith, she‘d have never been charged or tried.  It‘s a trophy case for the federals.  They have a habit of doing such things.  I don‘t agree with it, but they do it repeatedly.

MITCHELL:  And why do you think that they went after her?

RAMSEY:  Because she‘s Martha Stewart.  I mean, she‘s not guilty of insider trading.  That‘s the story.  She went, apparently without a lawyer, to talk to the people that she probably shouldn‘t have talked to.  But I can‘t remember ever representing anyone, other than a celebrity, for making a false statement.  Those are the kind of cases that the federals just don‘t pull out the heavy artillery for unless they can get into a position of being really sententious and really pompous and talking about, Oh, my God, how we are setting an example for all of America.  And in the meantime, they crush a woman like poor Ms. Stewart.  I‘ve got a lot of sympathy for her, and I admire her spunk.

MITCHELL:  Well, you just saw her come out and say that it was just a small personal matter, yet Harvey Pitt tells us that she lied.  You can‘t lie to the government.

RAMSEY:  Well, he‘s still got a case—I mean, he‘s my brother lawyer now.  I don‘t want to say anything bad about Mr. Pitt.  But he‘s still got a case of the federalitis, which involves the very sententious pomposity I‘m talking about.  I mean, this is—this wouldn‘t make a good traffic court case but for the fact that she‘s Martha Stewart.

MITCHELL:  Well, what do you think about her defiance and the way she came out, and talked about “the venom and the gore” and that she‘s been suffocating?  Is that sort of sticking her thumb in the eye of the appeals court?  And does that hurt her down the road?

RAMSEY:  No, I don‘t think so.  And I think she‘s speaking the truth.  That‘s the way a federal prosecution is.  It‘s designed—it‘s a machine that is designed to crush people.  She didn‘t let it crush her, and I admire the woman.  I mean, she came from scratch.  She has done—lived a good life, as far as I can see.  And the federals picked her out because she is a famous woman to prosecute and to make speeches about, Oh, my God, you can‘t ever lie to the government, as though none of them ever told lies.

MITCHELL:  And what do you think about her sentence?

RAMSEY:  Well, if the judge had had the discretion—the guidelines are unfortunately limiting on our federal judiciary.  They should not exist, in my opinion.  But the judge apparently went as low as the judge could, and to that extent, I approve of it.

MITCHELL:  What is she going to experience?  What is it going to be like for her in a minimum-security prison, assuming that she doesn‘t win her appeal?

RAMSEY:  Well, you know, there‘s an urban myth out there that federal institutions are country clubs, and that‘s just a bloody lie.  They‘re hard, hard places to live in.  They are just a total culture shock for anybody that comes from the places that Martha Stewart has been abiding in for the last few years.  It‘s a horrible sentence.

MITCHELL:  She came out and she talked about people subscribing to her magazine and making sure that the customers don‘t go away.  Was that kind of advertising appeal good legal sense?

RAMSEY:  Well, I don‘t think it has anything to do with the law.  It means that the woman‘s not letting the federal government intimidate her, and I admire her for that.  So many people are intimidated and frightened when the federal government turns its might toward them.  You know, we are the federal government.  This is a democracy.  Every one of us is a part of the government.  And I don‘t think there‘s any reason to be intimidated by these people who happen to wear blue suits and act as prosecutors simply because they work for the federal government.  I admire the woman.

MITCHELL:  Do you think she has a good chance on appeal?

RAMSEY:  That‘s hard to say.  I wasn‘t present at the case.  You know, it‘s just a very difficult question to answer.  I think that there may be a substantial problem with that juror, but other than that, I would not opine.

MITCHELL:  That‘s the juror that might have perjured himself.  And then there was also the case of some evidence of the person in charge of the labs for the Secret Service that...

RAMSEY:  Right, and...

MITCHELL:  ... had a perjury issue.

RAMSEY:  Yes, that‘s an issue, obviously, on appeal, because the trial

judge made a finding of fact that that was—that it didn‘t affect her

case.  And I doubt the appellate court will overturn a finding of fact made

by the person on the spot.

MITCHELL:  OK.  Well, we‘re going to come back in just a minute, so stay right there.


MITCHELL:  We‘re going to talk about what similarities, if any, there are between the case of Martha Stewart and your own client, Kenneth Lay.

You‘re watching HARDBALL on MSNBC.




MARTHA STEWART:  I had been choked and almost suffocated to death during that time, all the while more concerned about the well-being of others than for myself, more hurt for them and their losses than for my own, more worried for their futures than the future of Martha Stewart the person.


MITCHELL:  Welcome back to HARDBALL.  We‘re back with defense attorney Michael Ramsey, who is currently representing ex-Enron CEO Kenneth Lay.  Mr. Ramsey, do you see any similarities between Martha Stewart and your client, Ken Lay? 

RAMSEY:  Very few.  They prosecuted Martha Stewart for collateral offense to the insider trading, and they‘re prosecuting Ken Lay for offenses that don‘t have anything to do with the collapse of Enron.  There‘s a similarity there, but to compare the Stewart case to the Lay case is like comparing a grain of sand to the entire beach.  It‘s just not a valid comparison. 

MITCHELL:  She‘s going out, she‘s doing Barbara Walters, she‘s doing Larry King.  She‘s going public with her defiance.  Ken Lay had a news conference, did some interviews.  Why is that a good strategy for a defendant? 

RAMSEY:  Well, I think the First Amendment is the First Amendment, because it‘s probably the most powerful of the amendments of the Bill of Rights.  I think people need to get their stories out, and in particular, people that have a story to tell.  My advice to Ken Lay is to get out and to talk to anybody that wants to talk to him about the case.  We want to get to trial as quickly as possible. 

MITCHELL:  A lot of us were struck by that extraordinary scene of the perp walk, Ken Lay in handcuffs.  It seemed a little unusual.  Why was he in handcuffs? 

RAMSEY:  Well, because the federals insist on getting a loop of tape of the defendants in the Enron case walking stooped over with handcuffs on them.  I offered to bring him down to the courthouse, surrender him, and get our bond in place, and then take him out back, and put the cuffs on him and let them photograph him that way, but they didn‘t go for it.  You know, it‘s a strange, strange thing.  The federal government...

MITCHELL:  I don‘t get it, sir, because there‘s no question that he wasn‘t on the run, and he was, you know, a white collar defendant, going to an appointed date in court. 

RAMSEY:  Right. 

MITCHELL:  So why the cuffs? 

RAMSEY:  Well, it‘s part of media management by the federal government.  The federals are masters of that strategy.  They, you know, ever since the day that John Edgar Hoover was wearing a dress, they have been masters of media management.  And they have to have that.  You know, that day, I counted 23 times on television that I saw Ken Lay doing the perp walk.  And they insisted on it.  You know, I told them they could go chase terrorists or do something else, whatever the FBI does in its spare time, and I‘d bring Ken down to the courthouse in a businesslike way, but they wouldn‘t have any of it.  And when the judge changed the schedule, Ken had to get up an extra 30 minutes early just to get out there.  I wouldn‘t go with him because it was too damned early. 

MITCHELL:  Now, would you ever let one of your clients go and talk to the prosecutors in an initial interview without being represented? 

RAMSEY:  Not without a court reporter there.  You know, it‘s a bad idea to try to deal with those people unless you have a lawyer.  They are not friends of ours.  They‘re not guardians of the Constitution.  You saw that press conference that Mr. Comey held, where all the highest echelon of the political appointments in law enforcement in America were on national television, calling Ken Lay a corporate crook, in violation of all the rules of ethics.  You know, it was set up—it was set up that way.  That‘s the way they play, and that‘s the way you have to play back with them. 

MITCHELL:  Of course a lot of people say that they suffered because of what happened with Enron. 

RAMSEY:  Oh, many people did suffer.  There‘s no question about it.  It was a tremendous tragedy here in Houston in particular.  And nobody—I mean, I cannot express how badly Mr. Lay feels about it.  He has lost a fortune himself, but he‘s nowhere nearly in the depth of despair that some of the poor people are that lost everything. 

MITCHELL:  I guess his basic defense, not the legal defense but his basic argument is that he did not know what was being done around him by Andrew Fastow and others.  Is that credible, that someone who is a major CEO didn‘t know what else was happening around him? 

RAMSEY:  Well, if you have a sophisticated thief who‘s using sophisticated means to steal, he doesn‘t tell the chairman of the board that he‘s stealing, obviously, he hides it.  And Andy, whatever else you say about him, he may be a liar, he may be a thief, but he‘s smart.  The amount of money that Andy Fastow himself put in his pocket is not what sank Enron.  It was the loss of confidence in Enron that, when word got on the street that there were problem with the chief financial officer, and that loss of confidence, because they were a trading organization, is what froze liquidity to the extent that, like an airplane that has to travel 300 miles an hour or fall, when they slowed down, they fell.  But that really can be laid at Andy‘s feet.  I mean, he‘s the one that sowed those seeds. 

MITCHELL:  What is the timing in your case?  What is next in the Enron case?

RAMSEY:  We—I hope the prosecutors are watching this.  We want a speedy trial.  We want to go to trial as quickly as possible, and we‘re in a judge‘s court who I think is an expeditious man.  He‘s a judicious man.  But I think with deliberate speed, we could get to trial two, three months out.  That‘s what I‘m going to ask for. 

Now—and it‘s not up to the government.  There‘s a law that says

we‘re entitled to a speedy trial, and they have chosen to hook Ken into a -

·         kind of grafting a trailer hitch onto a pre-existing case that had been already declared complex, so that it holds the Speedy Trial Act, and they can‘t do that.  I mean, if a man—and let me say this in general.  Ken Lay was the CEO, Ken Lay was the chairman of the board for 14 years.  He wants to go to trial first.  We believe that the country deserves to have him go to trial first, and certainly the people that suffered at Enron are entitled to get to the bottom of what happened.  So we want to go to trial. 

MITCHELL:  I know you‘re not her lawyer, but do you have any advice tonight for Martha Stewart? 

RAMSEY:  Yes, maintain the attitude that she has.  Don‘t let them wear her down.  Don‘t be afraid of them.  Go ahead and do what you have to do, but don‘t let yourself be intimidated by people that essentially are acting as bullies. 

MITCHELL:  What about these pictures that we‘ve seen in some of the newspapers of her out partying in the Hamptons?  Does that go against her?  Should she tone it down a little bit? 

RAMSEY:  I think she should live her life just like she always has.  I think that if there‘s a mistake here, there‘s a minor mistake.  She‘s not guilty of insider trading.  She did not profit here.  And that‘s the part that people seem to miss.  The federals all get swollen up like a bunch of toads claiming, oh, my God, she told us a tale.  Well, OK.  It happens all the time.  People...

MITCHELL:  There are laws against lying, though. 

RAMSEY:  Well, certainly.  And there should be.  But they are a little

·         they are more observant in the breach than in the enforcement.  They pick out trophy defendants like Martha Stewart to prosecute in order to make an example, so the woman ought to go about living her life just as she‘s always lived it, and godspeed. 

MITCHELL:  All right.  Well, thank you very much, Michael Ramsey, for joining us tonight from Houston. 

RAMSEY:  OK.  It was a pleasure. 

MITCHELL:  And coming up next, what‘s next for Martha Stewart‘s business empire?  “BusinessWeek‘s” Mike France and “Vanity Fair‘s” Michael Wolff will be joining us.  You‘re watching HARDBALL on MSNBC. 


MITCHELL:  Coming up next, what will happen to Martha Stewart‘s business empire now that she‘s been sentenced to five months in prison?  HARDBALL is coming back after this.


MITCHELL:  Welcome back to HARDBALL.  Michael Wolff is a media columnist with “Vanity Fair,” and Mike France is the senior writer at “BusinessWeek.”

First to you, Mike France, you‘ve been covering this case from the beginning.  What did you think of her defiance today? 

MIKE FRANCE, BUSINESSWEEK:  Well, it actually didn‘t bother me so much, because there are plenty of people out there who are very sympathetic to Martha, and I think those people won‘t really be thrown at all by the fact that she finally stood up and made her point.  There was a certain sense in which she didn‘t realize that, hey, she was also responsible for what happened to all these employees she was crying about, but no matter, I think that it‘s something that will be able to fly because it was spoken from the heart and there are a lot of people who are sympathetic with what she had to say. 

MITCHELL:  Michael Wolff, are you sympathetic to what she had to say? 

MICHAEL WOLFF, VANITY FAIR:  I‘m completely sympathetic, and I‘ve also covered this trial and this imbroglio from the beginning, and I continue to think Martha got the bum‘s rush. 

MITCHELL:  You think that she was tagged because she‘s high profile? 

WOLFF:  Yes, I don‘t know how one could think anything else but that. 

The fact remains that the damage here was $50,000 worth of damage, and this is an awful lot of expenditure of time, resources, and governmental power against that level of fault. 

MITCHELL:  Well, Mike France, what about that?  Is a small lie, a $50,000 lie less important than a big insider trading case? 

FRANCE:  The difference is this.  She should have been punished civilly for what she did.  And she could have paid a very big fine and she could have been barred from working at her company, which would have been punishment and example enough.  But I think a lot of people really lost sympathy for this case when there was no underlying crime committed.  And the whole idea that she was—you know, had she obstructed justice and committed insider trading, or and committed securities fraud, well, then sure, really punish her in that case for obstructing justice, but when there‘s no underlying crime here, then it kind of takes out a lot of the moral force of the charge, I think in many people‘s eyes.  But that‘s a distinct point.  She still should have been punished, but perhaps not have had her liberty deprived. 

MITCHELL:  Michael Wolff, what about her going out, Barbara Walters, Larry King, presumably she‘ll do other interviews.  Does that help, hurt, no difference? 

WOLFF:  Well, I would suspect that in the end, it‘s no difference.  I mean, I think it probably makes her feel better.  You know, I mean, we know where she‘s—what‘s going to happen to her.  She‘s going to get—she‘s going to go to prison for five months.  Is there a chance...

MITCHELL:  You don‘t think the appeal is going to work? 

WOLFF:  You know, I mean, her appeal is like—it‘s like all appeals. 

Mostly they don‘t work.  You certainly can‘t count on it working.  Can she have some influence, can she push it?  She can push it minimally.

She probably—the overwhelming likelihood is that she goes to jail for five months. 

MITCHELL:  Mike France, what about what Harvey Pitt was describing, which is the SEC case, which is insider trading? 

FRANCE:  Well, that‘s a real issue.  And she absolutely deserves to be punished for that, and my guess is, as he suggested, that probably will ultimately settle, but, you know, having said that, that‘s an entirely different order of punishment than going to jail, and it would not have had the kind of catastrophic result on her.  It would have punished her, but it would not have been quite the same catastrophe that this is. 

WOLFF:  You know, I can also still—still put my feet into the sand here and argue the merits of this case.  I mean, one of the things that happens, happens—somebody gets convicted and then we decide, oh, yes, OK, they‘re guilty. 

The fact of the matter is, this is still a highly equivocal case. 

There is no certainty about what she did.  She got in a situation where she

·         where it became about her, essentially how she was rationalizing what she did.  And we‘ve decided, well, I mean, the jury decided that that—those rationalizations were a set of lies.  But I sat through that every day, I sat through that trial, and, you know, unless you were seeing Martha Stewart, I don‘t think you could have seen a specific lie that was told there. 

MITCHELL:  So they convicted Martha Stewart, the person, the symbol, not the person...

WOLFF:  For being Martha Stewart, exactly. 

MITCHELL:  Just for being Martha Stewart.  Mike France, what is your take on that? 

FRANCE:  Well, I happen to agree with that somewhat.  I don‘t think it‘s the kind of thing I would have been charged with.  There‘s no doubt that her, you know, this opportunity...

MITCHELL:  I don‘t think you would have gone to see the prosecutors without a lawyer. 

FRANCE:  I would not have done that either. 

WOLFF:  Well, wait a minute.  Wait a minute.  That‘s not true.  She did go.  She went with actually lawyers from one of the greatest security firms in the world, Wachtel Lipton. 

MITCHELL:  But she wasn‘t represented in that initial meeting or—I mean, she had attorneys on her...

WOLFF:  Her attorneys were with her—were with her. 

MITCHELL:  Well, how did they let her talk to the prosecutors then? 

WOLFF:  You know, I don‘t know.  You know, that‘s one of the, I think, the lasting messages that everybody should take away from this trial.  If the feds call you up, don‘t speak to them. 

MITCHELL:  Let me tell you, if the feds call me up, I‘m getting Michael Ramsey.  I don‘t know if you saw him in the last segment. 

WOLFF:  I did.  He seemed great, yes. 

MITCHELL:  But I want a Texas lawyer, yes.  But Mike France, what do you think happens next to her?  Let‘s say she loses the appeal, since you guys both think that it‘s very hard to win an appeal.  She goes to prison.  What is her business future?  She comes out of prison, what can she do? 

FRANCE:  Well, is as it happens, her company can survive, and is making money, and has no debt.  But you have to believe that this is ultimately a deteriorating brand.  Martha‘s brand ultimately depended upon this kind of very hygienic, pristine, ultimately kind of square image.  It‘s kind of hard to reconcile with having her being in prison. 

So I think they‘re really in a bind.  Although the one thing I have to say is, as much as Americans love to see the rich and powerful fall, they also love the story of the fall and rising.  And it is not outside the realm of possibility to me that somehow this might become some kind of Rocky story, and then at least the people who love Martha Stewart, who exist, might wind up rooting for her and supporting her brand. 

MITCHELL:  Advertisers did—the market—the stock market went up a little bit today, her stock.  Advertisers, will they come back, Michael Wolff?

WOLFF:  Well, you know, that‘s the interesting thing.  It‘s not consumers who are fleeing Martha Stewart. 

MITCHELL:  Exactly.  It‘s the advertisers. 

WOLFF:  ... and her products.  It‘s advertisers.  So this is really strictly about perception.  It‘s advertisers who don‘t want to be in proximity with a convicted felon. 

Now—and I don‘t know what happens, what happens, if Martha goes to jail, does she get a chance to have a clean slate, start over.  You know, this is the politics of celebrity, which is hard to figure out. 

I do know, and there‘s an interesting example, which is the Sotheby‘s example, and the chairman of Sotheby‘s, Al Taubman, went to jail.  The CEO of Sotheby‘s, DeDe Brooks, testified against him and did not go to jail, and, you know, to be honest, I think that everybody thinks pretty much Al Taubman, well, you know, he went to jail, he did his time and he‘s kind of a mensch, whereas everybody thinks that DeDe Brooks is sort of rat. 

So if Martha goes to jail, comes out of jail, starts again, I think she has a good opportunity to do it all over.  I mean, Martha is really good at this, let‘s remember. 

MITCHELL:  We saw her today.  Mike France, what do you think her chances are coming back out and rebuilding her life? 

FRANCE:  Here‘s what I would say about her potentially rehabilitating her image, is that alone, among the entire crop of corporate criminals, and there have been a whole lot of them, so all of the Enron individuals, Quattrone, Bernie Ebbers, she‘s the only one who really had a sizable amount of both serious and popular support.  This case is really not like the others in so many ways, and one of them is this.  She has this Web site that apparently—I don‘t know the numbers, hundreds of thousands of hits, according to her, supporting her. 

So I think that could be in her favor, but once again, it‘s a unique situation, and you can see this kind of breaking a lot of different ways.  Also because she herself is not necessarily such a likable person, so kind of hard to ultimately predict the outcome. 

MITCHELL:  OK, hang on right there.  We‘ll be back with more from Michael Wolff and Mike France.  You‘re watching HARDBALL on MSNBC.


MITCHELL:  We‘re back with “Vanity Fair‘s” Michael Wolff and “BusinessWeek‘s” Michael France. 

Michael Wolff, you track these celebrities all the time.  Are they scared now, do they see something coming down the train—the track at them? 

WOLFF:  You mean celebrities other than Martha, other than celebrities...

MITCHELL:  Yeah, business executives. 

WOLFF:  ... who are not on trial.  Yes.  I think—I think there‘s probably a larger issue, and it‘s just not about celebrities.  It‘s about people who—people who distinguish themselves in almost any way.  People who—who are—who somehow separate from the crowd.  People whose, whose, who put their heads up.  Yes, I think if there‘s a big fear that you put your head up, it is going to get whacked. 

MITCHELL:  And Mike France, what happens to the company in terms of changing the name?  Getting another person out front while she‘s in jail if she loses her appeal?  What do they do with Martha Stewart? 

FRANCE:  Well, it‘s an awfully awkward situation.  One might imagine at a certain point they would want to ditch that name, but it‘s not as if anyone is going to ever forget whose company this was.  And she‘s the founder, and there are plenty of people who really support her.  So I would imagine it‘s something they‘re going to put a lot of research into.  It‘s not obvious to me what the answer to that should be. 

MITCHELL:  It‘s a real branding problem, isn‘t it? 

FRANCE:  I think it‘s from the textbook, they don‘t get much worse. 

MITCHELL:  I‘m wondering also, Michael Wolff, about what is it about Martha Stewart, that made so many people take shots at her?  She was the butt of so many jokes, you know, Letterman, Leno.  What is it about that woman?  The perfectionist, if you will. 

WOLFF:  Well, one of the things is, let‘s, you know, let‘s not mince

words, it‘s because she‘s a woman.  She‘s a woman, she‘s a successful

woman.  As a matter of fact, she may be the most successful woman of—of

our age.  She has run roughshod over a lot of men and a lot of corporations

controlled by—by men, Time Warner being one of them.  And then she has

created an image of absolute perfection.  It‘s almost irresistible not to -

·         not to poke fun at her.  As a matter of fact, if you don‘t poke fun at it, you yourself end up feeling diminished in so many ways. 

MITCHELL:  So it has to do with gender, it has to do with the product itself, with the personality. 

WOLFF:  Also, remember, lots of people don‘t like Martha.  And Martha‘s own personal reputation has been—has been nothing short of kind of ghastly.  She‘s a meany.  Although I must say I‘ve known Martha for sometime, and she‘s only ever been charming to me. 

MITCHELL:  Well, Mike France, what about competitors?  Is there a vacuum for some other business to crop up?  The next Martha Stewart? 

FRANCE:  There is a vacuum right now for someone to kind of rise up and take her position.  But the problem is, I‘m not sure out of all of the people out there who have been mentioned as potential candidates to do that, anyone kind of combines her elements and her resonance, the way she connected.  She‘s very much linked all this identity that she‘s created, and I don‘t know that anyone can step right up and do it. 

MITCHELL:  Michael Wolff, what‘s next for Martha Stewart?  There are this series of interviews, will she play that out until she—if she does have to go to jail?

WOLFF:  Yeah, I mean, I think that a debate has to be going on, with -

·         among her advisers, in her family, about whether you, you fight this until the last possible moment, or you—you just take it, you go to jail, you do it.  And you—you invest, invest yourself in what happens afterwards. 

MITCHELL:  I would think you‘d want to just get it over with, but you don‘t hire Walter Dellinger if you‘re not going to pursue a vigorous and tough appeal. 

WOLFF:  Well, I think—I mean, I think—the truth is that you can do both at the same time. 

MITCHELL:  And briefly, Mike France, any final thoughts on the larger meaning of all of this?  If there is? 

FRANCE:  Well, I think you shouldn‘t really take this beyond the fact that this happened to arise at a time when people are very, very angry at corporate America.  I happen to think that the woman‘s issue is a complete red herring, I think it would have happened had she been a man.  Had she been a man.  But the issue is...

WOLFF:  Well, yeah, well, I mean, we can argue that.  I mean, this is worth—this is worth arguing.  It hasn‘t happened to any men.  I mean, I don‘t think, I think, I think it‘s really have to stop there. 

MITCHELL:  We‘re going to have to debate this...

WOLFF:  Highlight this issue at the very least.

MITCHELL:  ... on a another show.  Thank you both very much.  Thank you, Michael Wolff and Mike France. 

Chris returns Monday night at 7:00 Eastern for more HARDBALL, and he‘ll be joined by Republican Party Chairman Ed Gillespie. 

And starting Monday, we‘ll preview Chris‘ special with Tom Brokaw, on the greatest moments from the political conventions, picking our presidents. 

Right now it‘s time for COUNTDOWN with Keith Olbermann.   


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