NEW YORK - Martha Stewart was convicted Friday of obstructing justice and lying to the government about a superbly timed stock sale, a devastating verdict that probably means prison for the woman who epitomizes meticulous homemaking and gracious living.

justice and lying to the government about a superbly timed stock sale, a devastating verdict that probably means prison for the woman who epitomizes meticulous homemaking and gracious living.

The jury of eight women and four men deliberated three days before convicting Stewart of all counts against her. The charges carry up to 20 years in prison, but Stewart will almost certainly get much less than that under federal guidelines at her June 17 sentencing.

Her former stockbroker, Peter Bacanovic, 41, was convicted on all but one count against him, filing a false document.
Stewart, 62, grimaced as each count against her was read. Her eyes appeared to widen slightly. Her daughter, Alexis Stewart, was in tears.
“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, of the Bronx.
An hour before the verdict, Stewart, Bacanovic and their lawyers arrived in the courtroom. It wasn’t until about 3 p.m., after an hour of nervous energy, that the judge entered the courtroom and the verdicts were read.

Stewart spent most of her last hour before the verdict checking her watch and twirling a pen in her fingers. She later released a statement promising an appeal.

“I believe in the fairness of the judicial system and remain confident that I will ultimately prevail,” she said.

Trading in her company, Martha Stewart Living Omnimedia, plunged when it began trading again after the verdict. The shares had been halted for the verdict, after rising sharply on word that the jury had reached a decision.
 

The uber-homemaker left the courtroom with a somber expression, speaking to no one at the defense table before bolting to a holding room away from the media.

Stewart remained mum during the trial, too, opting not to take the witness stand to present her version of the events. Juror Hartridge said he had hoped to see Stewart testify.

“I would have liked to have heard from her,” Hartridge said. “I would have loved to have heard the other side of the story.”

One Stewart supporter on the courthouse steps clutched a neon-yellow sign reading, “FREE MARTHA,” as other backers of the multimillionaire cheered.

Stewart and Bacanovic must report to a probation office within a week for processing. A spokesman for federal prosecutors said he was unsure how far each defendant’s prison term could be reduced under sentencing guidelines.

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, an announcement that sent ImClone’s stock plummeting.
 

FACT FILE Charges in Stewart case

Here are the government’s charges against Martha Stewart and former stockbroker Peter Bacanovic: Martha Stewart   • Conspiracy • False statements • False statements • Obstruction of justice Peter Bacanovic   • Conspiracy • False statements • Making and using false documents • Perjury • Obstruction of justice Penalties GUILTY Alleges Stewart and Bacanovic "willfully and knowingly" worked together to obstruct justice and make false statements in the stock-trading scandal.   GUILTY Alleges, among other things, that Stewart lied when she told the Securities and Exchange Commission, the FBI and federal prosecutors she had prearranged with Bacanovic to sell ImClone when it fell below $60. GUILTY Alleges, among other things, that Stewart lied when she told the SEC, the FBI and prosecutors that she did not recall being told on Dec. 27, 2001, that the family of ImClone Systems founder Sam Waksal was selling stock. GUILTY Alleges that, from January to April 2002, Stewart "willfully and knowingly" tried to hamper the SEC investigation of her stock sale by providing misleading information. GUILTY Alleges Stewart and Bacanovic "willfully and knowingly" worked together to obstruct justice and make false statements in the stock-trading scandal. GUILTY Alleges Bacanovic lied when he told regulators he had had a conversation with Stewart in which she decided to sell ImClone when it reached $60 per share. Also alleges he lied about a Dec. 27, 2001, conversation in which he told Stewart the stock price had dropped. NOT GUILTY Alleges Bacanovic altered a worksheet of Stewart's portfolio to make it appear he and Stewart had prearranged to sell ImClone when it fell below $60. GUILTY Alleges Bacanovic lied repeatedly in a Feb. 13, 2002, interview with SEC investigators, particularly about his conversations with Stewart in the weeks surrounding her sale of ImClone stock. GUILTY Alleges that, from January to April 2002, Bacanovic "willfully and knowingly" tried to hamper the SEC investigation of Stewart's stock sale. The maximum penalty for each count is five years in prison and a $250,000 fine. If convicted, both are likely to get far lighter penalties than the maximum under federal sentencing guidelines.

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.

With her conviction, the government may press to have her removed from the board of her company. She stepped down as chief executive after being indicted last summer but remains as chief creative officer.

The verdict jeopardizes the media empire that Stewart carefully built over the years in becoming the nation’s premier homemaker — an image she put forth by way of magazines, TV programs and everything from cookie cutters and garlic presses to bedsheets and pillows. Marketing experts have said that the company is so closely tied to her name and face that the effect could be devastating.

 

Fact file Key players in the Martha case • Martha Stewart • Peter Bacanovic • Samuel Waksal • Douglas Faneuil Stuart Ramson / Getty Images The guru of domestic style and gracious living who was convicted of obstruction of justice and lying to the government about her sale of 4,000 shares of ImClone Systems Inc. on Dec. 27, 2001 — the day before bad news on an ImClone drug from government regulators sent the stock price tumbling. Stewart resigned as chairman and CEO of her media empire in June. A judge had previously tossed out a more serious charge of securities fraud against Stewart. Mary Altaffer / AP Stewart’s former broker at Merrill Lynch who was convicted of conspiracy, obstruction of justice and lying about Stewart’s sales. Bacanovic had claimed that he and Stewart agreed in early December 2001 to sell ImClone shares if the stock price fell below $60 per share. He was acquitted on a fifth charge, making a false statement. Louis Lonzano / AP Founder of ImClone and longtime friend of Stewart who pleaded guilty to six criminal counts in the ImClone scandal, and admitted tipping off his daughter Aliza to sell ImClone stock before it plummeted on the bad news. Waksal also admitted dodging more than $1 million on sales tax on nine paintings he bought from an art gallery. He is serving a sentence of more than seven years. Kathy Willens / AP Former assistant to Bacanovic at Merrill Lynch who told investigators Bacanovic ordered him to tell Stewart that Waksal was selling his shares. Faneuil pleaded guilty last year to a misdemeanor charge of accepting gifts to keep quiet about Stewart’s stock sale. He was a key witness against Stewart and Bacanovic and has not been sentenced.   Source: The Associated Press • Print this

Shares of Martha Stewart Living Omnimedia plunged 23 percent after the verdict was announced, down $3.17 at $10.86. The stock had risen 16 percent before the verdict as investors bet on whether she would be acquitted. The New York Stock Exchange halted the shares at 3:02 and lifted the hold about half an hour later.

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.

The government’s star witness was Douglas Faneuil, a former Merrill Lynch & Co. assistant who said he passed the tip about Waksal to Stewart on orders from his boss, Bacanovic. Faneuil said that when he told Bacanovic about a flurry of selling by the Waksal family that morning, Bacanovic blurted: “Oh my God, get Martha on the phone.”

He also said Bacanovic pressured him to lie about the transaction.

Faneuil “was very important,” Hartridge said. “He was really the foundation.”

Marc Powers, one of Faneuil’s lawyers, said his client was looking forward to resuming his normal life.

“Doug had no interest in the outcome. ... We had no interest in whether or not this case came to court. His conscience told him it was the right to do.”

 

Prosecutors also contended Bacanovic doctored a worksheet of Stewart’s portfolio after the fact by making the notation “(at)60” next to her ImClone stock. A forensics expert with the Secret Service testified that the mark was made in a different ink.

In addition, Stewart’s personal assistant testified Stewart altered a computer log of a Dec. 27, 2001, message from Bacanovic, then immediately told her to restore the log to its original wording.

Also, a longtime Stewart friend, Mariana Pasternak, testified Stewart confided that she had known the Waksals were selling. Pasternak said Stewart added: “Isn’t it nice to have brokers who tell you those things?”

But Pasternak admitted on cross-examination that the remark may have been something she herself thought, not something Stewart said.

In closing arguments, prosecutor Michael Schachter said the story about the arrangement to sell ImClone at $60 was “phony,” “silly” and “simply an after-the-fact cover story.” He said Stewart and her broker “left behind a trail of evidence exposing the truth about Martha Stewart’s sale and exposing the lies they would tell.”

For its part, the defense tried to discredit Faneuil as an admitted drug user and a liar. When the scandal broke, he initially backed up his boss, but later pleaded guilty to a misdemeanor, saying he had received an extra week of vacation and a free airline ticket for keeping his mouth shut.

Stewart did not testify, and her lawyers called only one witness during a defense that lasted less than an hour.

In closing arguments, defense attorney Robert Morvillo said that the conspiracy as outlined by the government was too sloppy to be true and urged the jury to let Stewart get back to “improving the quality of life for all of us.”

“If you do that,” he said, echoing Stewart’s slogan, “it’s a good thing.”

 

FACT FILE High-profile corporate scandals • Adelphia Communications Corp. • Credit Suisse First Boston • Enron Corp. • HealthSouth Corp. • Martha Stewart Living Omnimedia • Qwest Communications International Inc. • Tyco Corp. • WorldCom Inc. Founder John Rigas, his two sons and former assistant treasurer Michael Mulcahey are on trial in federal court, accused of stealing tens of millions of dollars from the cable television giant’s investors to support a lavish lifestyle. Frank Quattrone, the company’s former investment banking star, is scheduled to be retried in April on federal charges of obstruction of justice, after a trial last year ended in a hung jury. Quattrone made a fortune taking Internet companies public during the dot-com stock craze. Former chief executive Jeffrey Skilling pleaded innocent in February to fraud, conspiracy, insider trading and other federal counts related to the once-mighty energy giant’s collapse. Former chief financial officer Andrew Fastow has pleaded guilty to two counts of conspiracy and agreed to cooperate with prosecutors. Fired CEO Richard Scrushy is scheduled for trial in August on federal charges of leading a multibillion-dollar scheme to overstate HealthSouth earnings to make it appear the company was meeting Wall Street forecasts. A federal jury convicted company founder Martha Stewart of conspiracy, obstruction of justice and making false statements related to a personal sale of ImClone Systems stock. Four former executives — Thomas Hall, Bryan Treadway, Grant Graham and John Walker — are on trial in federal court, accused of plotting to help the company improperly book $34 million in revenue. Former CEO L. Dennis Kozlowski and former CFO Mark Swartz are on trial for allegedly stealing $600 million from the company. The jury is expected to begin deliberations next week. Former CEO Bernard Ebbers pleaded innocent Wednesday to federal fraud and conspiracy charges for allegedly directing a massive accounting fraud now estimated at $11 billion. Former CFO Scott Sullivan pleaded guilty a day earlier to conspiracy and securities fraud charges and agreed to testify against Ebbers.   Source: The Associated Press • Print this

Stewart could have faced even more prison time, but the judge threw out the most serious charge — a securities fraud count that alleged she deceived investors in her own company when she publicly declared her innocence in the scandal. The judge had referred to the charge as “novel.”

At times, the trial seemed more fodder for gossip columns than the financial pages. Stewart’s arrival each day was chronicled by a barrage of photographers and camera crews, with the tabloids taking careful note of her expensive handbags and stylish heels. Celebrities Rosie O’Donnell, Bill Cosby and Brian Dennehy all showed up in court in support of Stewart.

Stewart had a reputation before the trial as a ruthless businesswoman, and in court she was portrayed as rude, insulting, demanding and cheap. According to testimony, she once threatened to take her business elsewhere because she did not like her brokerage’s telephone hold music.