A defiant Martha Stewart, the disgraced American doyenne of design, emerged from court on Friday vowing to make a comeback despite being sentenced to five months in prison for lying about an illicit share deal.
”Today is a shameful day,” she said outside court. ”It is shameful for me and for my family and for my beloved company.”
Stewart (62), whose blonde bob and schoolmistress demeanour are known across the country from her magazines and television empire, was also fined $30 000 and ordered to spend a further five months under house arrest in one of her many homes. She has picked her palatial mansion in Bedford, New York.
Petyer Bacanovic, the Wall Street banker who conspired with her, was given the same jail term. He was also fined $4 000.
News of the sentence, which was more lenient than legal experts had expected and which was postponed while she appeals, sent shares in her company Martha Stewart Omnimedia rocketing.
Not one to pass over a chance for self-promotion, Stewart took advantage of the TV crews gathered outside the Manhattan court to plug her magazines and website.
”Whatever happened to me shouldn’t have any effect whatsoever on the great company Martha Stewart Omnimedia,” she told the viewers. ”I’ll be back, I will be back.”
Stewart was convicted on March 5 of lying about selling shares in a cancer drug company, ImClone, in December 2001, the day before the Federal Drug Administration (FDA) refused to clear one of its products, news that sent its share price plumeting. She was found guilty of two charges of making false statements, one of obstructing justice and one of conspiracy.
The more serious charge of securities fraud — that she had tried to maintain her own company’s stock price by lying about her dealings elsewhere — was dismissed by the judge during the trial.
Her case has divided the nation. Some see her plight as the vindictive hounding of a rich and powerful woman while others believe it will serve as an important lesson to the rich that they will no longer be allowed to get away with white-collar crime.
Her supporters say that because the original and more serious charge of securities fraud was dropped, Stewart has been convicted of lying about something that was not technically illegal.
But for many Americans her sentencing will be a victory in the wake of corporate collapses such as that of Enron and stories of executive greed that have emerged since the ending of the dotcom boom. On Friday, dressed in a black suit, she appeared to be close to tears while being sentenced by Judge Miriam Goldman Cedarbaum. But by the time she emerged, her demeanour was more that of a Wall Street banker than a convicted felon.
She said a ”small personal matter” had been ”blown out of all proportion and with such venom and such gore it’s just terrible”.
She stopped short of apologising for her actions, saying only that she was sorry it had plunged her company, which she was forced to leave when convicted in March, into chaos and caused the loss of 200 jobs.
”I want them to know how very, very sorry I am for them and their families.”
Although she has lost her syndicated newspaper columns and her TV show was taken off the air by one of the big networks, institutional investors were on Friday said to be buying back into Martha Stewart Omnimedia and the shares gained almost 20%.
Her short jail term and the fact that during her house arrest she will be able to spend 48 hours a week outside her house mean she will not be out of action for long.
The chief executive of ImClone, Samuel Waksal, a friend of Stewart, was sentenced in June 2003 to seven years and three months for insider trading and evading taxes on his $15-million art collection. Members of Waksal’s family sold shares in the company on the same day as Stewart, while Waksal himself tried to offload stock only to be prevented from doing so by two brokerage houses.
Ironically ImClone has since performed strongly and the drug that was initially rejected by the FDA was given clearance during the trial.
The case against Stewart centred on contact between her and Peter Bacanovic, her broker from Merrill Lynch, after which she sold almost 4 000 shares in ImClone — all her holding — making almost $230 000. Both Stewart and Bacanovic maintained that they had agreed to sell the stock if it dropped below $60 a share. The collapse in the share price the following day would have seen Stewart’s holding drop in value by more than $50 000.
Bacanovic was convicted of making false statements, conspiracy, perjury and obstruction of justice.
During her trial, the court heard that when Stewart had found out that the Securities and Exchange Commission was investigating her share dealings she had requested that the computerised phone record of a telephone call she received from her broker be changed from ”Peter Bacanovic thinks ImClone is going to start trading downwards” to just a record that he had called ”re: ImClone”.
Ironically it was one of Stewart’s friends who dealt one of the most damaging blows during the trial. Mariana Pasternak, who was travelling with Stewart at the time of the ImClone sale, said that after the phone call she remarked: ”Isn’t it nice to have brokers who tell you these things?” — Guardian Unlimited Â