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Stewart convicted on all charges

Jury finds style maven, ex-broker guilty of obstructing justice and lying to investigators.
March 5, 2004: 4:54 PM EST



NEW YORK (CNN/Money) - A jury found Martha Stewart guilty Friday of obstructing justice and lying to investigators about a well-timed stock sale and the former stockbroker turned style-setter could face years in jail.

Her ex-broker, Peter Bacanovic, was found guilty on four of the five charges he faced.


Neither defendant appeared to show any emotion as the verdict was read, while the lead prosecutor seemed to be holding back tears of joy. Sentencing was set for June 17.

"The word is -- beware -- and don't engage in this type of conduct because it will not be tolerated," David Kelley, U.S. attorney for the Southern District of New York, said outside the courthouse.

One of the jurors said, "This is a victory for the little guys. No one is above the law."

In a written statement posted on her Web site, Stewart, 62, said, "Dear Friends: I am obviously distressed by the jury's verdict but I take comfort in knowing that I have done nothing wrong and that I have the enduring support of my family and friends." (For more on Stewart's statement, click here).


The panel of eight women and four men began deliberating Wednesday on whether Stewart and Bacanovic obstructed justice and lied to the government about her sale of ImClone Systems Inc. stock in December 2001.

Stewart's lead attorney said his client would appeal.

"It was a difficult process for all of us," Robert Morvillo said outside the courthouse, adding that he was disappointed in the verdict but confident about an appeal.

Both Stewart and Bacanovic left without speaking to reporters. Eyewitnesses said Stewart's daughter Alexis was crying.

"Unless this is somehow undone on appeal, she's a felon and she's going to prison," legal analyst Kendall Coffey said.

"This was a total rout," said CNN legal analyst Jeffrey Toobin, who sat through the trial. "The story she told investigators after she made the stock trade simply didn't add up."



Martha Stewart has been found guilty on all four counts. CNNfn's Chris Huntington reports.


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The conviction came exactly a week after U.S. District Judge Miriam Goldman Cedarbaum threw out the most serious charge against Stewart -- securities fraud -- which carried a maximum penalty of 10 years in prison and a $1 million fine.

The charge -- which the judge had called "novel" during the trial -- accused Stewart of using her own statements that she was innocent as a ploy to mislead investors in her company, Martha Stewart Living Omnimedia.

Martha Stewart Living (MSO: Research, Estimates) stock rallied early Friday on hopes for a favorable verdict but then plunged 22.6 percent afterward on the New York Stock Exchange, where Stewart once served as a director.

Analysts said the verdict was a serious threat to the company Stewart founded. She quit as chairman and CEO of Martha Stewart Living after she was indicted last summer but stayed on as chief creative officer. (For more on the company's outlook, click here).


Despite the intense publicity surrounding the trial -- the most closely watched of the recent corporate fraud cases -- the stock trade at its center involved a relatively small amount of money.

Stewart avoided a loss of about $51,000 by selling nearly 4,000 shares of ImClone stock on Dec. 27, 2001, rather than the next trading day, when the stock tumbled after regulators rejected the company's application for a key cancer drug.

By contrast, Dennis Kozlowski and Mark Swartz are charged with looting Tyco of $600 million, John Rigas and his sons are charged with stealing millions from Adelphia, the cable company Rigas founded, and the collapse of Enron and WorldCom led to billions of dollars in losses for investors and costs thousands their jobs.

Ex-Enron CEO Jeff Skilling and former WorldCom CEO Bernard Ebbers were each recently indicted for their alleged roles in the collapse of those companies. (For more on the scandals, click here).

Prosecutors argued that Stewart sold her ImClone stock only after Bacanovic told his assistant to tip her off that ImClone founder Sam Waksal was trying to sell. Stewart and Bacanovic had told investigators they had an arrangement to sell once the stock fell to $60.

YOUR E-MAIL ALERTS
ImClone

MSO

Peter Bacanovic

Martha Stewart




Bacanovic was broker to both Stewart and Waksal, who is serving a seven-year prison term after pleading guilty to securities fraud over his family's sale of ImClone shares.

The government's star witness in the case, Douglas Faneuil, Bacanovic's former assistant, testified that his boss ordered him to pass the inside tip about ImClone to Stewart.

Neither Stewart nor Bacanovic testified in their own defense at the trial, which began Jan. 27 and ran for five weeks. Attorneys for Bacanovic called just a handful of witnesses while Morvillo called only one witness.



http://money.cnn.com/2004/03/05/news/companies/martha_verdict/index.htm?cnn=yes

http://www.thesmokinggun.com/archive/marthaguilty1.html
 

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I'm surprised

I'm surprised at the verdict, despite not having followed the trial at all. After OJ walked, I figured any celebrity could avoid the law (unless you are Mike Tyson.) I'm also surprised that I am getting news updates on this site faster than I could on yahoo news. Thanks Doug!
 

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It was a dumb thing for her to do....

twice.... and she would have known better than anyone that the initial trade was wrong to make, and then to create a story afterwards. Of course, she wasn't tried over her attempt to prevent a $51,000 loss, but rather for scheming to cover up the initial insider trading transaction. The judge was right to toss the securities fraud charge.

It is an interesting story of how a story comes together in bits and pieces after alot of investigation. Criminal law convictions are not certainly correct, but there didn't seem to be many reasonable doubts in this case. It's too bad though. It reminds me of a investing addage I heard somewhere:

"Bears can make money, and bulls can make money. Only the pigs get slaughtered."
 

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Call me a Fred
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Now starts the everlasting appeals process. I'm sure her lawyers can find something that happened during the trial to get the verdict overruled. Maybe they can claim that the massive pre-trial publicity denied her a fair trial, or the feng shui in the court room was bad.
 

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Bored beyond belief.
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Personally, I'm rather looking forward to the

Martha S. Living X-mas Special this year..."Petit fours and canapes from cellblock D...."
 

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sn69 said:
Martha S. Living X-mas Special this year..."Petit fours and canapes from cellblock D...."

I think "petit fours" has a different meaning in prison than on a cooking show...
 

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MikeBiker said:
Now starts the everlasting appeals process. I'm sure her lawyers can find something that happened during the trial to get the verdict overruled. Maybe they can claim that the massive pre-trial publicity denied her a fair trial, or the feng shui in the court room was bad.
After I posted this, I did a Google search and found the following site.
http://www.freespiritcentre.info/astrology7.html
which concludes with:
"Therefore, Marta Stewart is well advised to increase her luck by Feng Shui. Detailed advice from a skilled Feng Shui master could serve her very well during this period."

So she should have had a Feng Shui master instead of a lawyer.
 

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Discussion Starter · #8 ·
should she have shut up?

PdxMark said:
twice.... and she would have known better than anyone that the initial trade was wrong to make, and then to create a story afterwards. Of course, she wasn't tried over her attempt to prevent a $51,000 loss, but rather for scheming to cover up the initial insider trading transaction. The judge was right to toss the securities fraud charge.

It is an interesting story of how a story comes together in bits and pieces after alot of investigation. Criminal law convictions are not certainly correct, but there didn't seem to be many reasonable doubts in this case. It's too bad though. It reminds me of a investing addage I heard somewhere:

"Bears can make money, and bulls can make money. Only the pigs get slaughtered."
From what I can tell, had she asserted the 5th and shut up, she'd not be in this mess. If she didn't commit a crime initially, then they'd have nothing, right? She's only in trouble for lying about it.
 

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DougSloan said:
From what I can tell, had she asserted the 5th and shut up, she'd not be in this mess. If she didn't commit a crime initially, then they'd have nothing, right? She's only in trouble for lying about it.
Agreed. I missed why the Feds chose not to go after the insider trading charge, regarding the initial transaction. It seems like there was at least one element in the crime that they were weak on.
 

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Foolish. Very foolish. She could have handled it in many was, but as we have seen, greed is a strong emotion. To begin with she could have just taken the loss. Even if it amounted to a few hundred thousand dollars, that would be insignificant to what it has obviously cost her in terms of the value of her company and her name, not to mention possibly facing some uncomfortable and embarrassing time in my old boss' digs :O) She could have just played stupid and blamed her broker for informing her, after being caught. But to deliberately alter evidence and attempt to cover up the incident, was amazingly stupid. She lost vastly more in net worth because of the fall in PPS of her company than if her investment in Imclone went to zero. At one point she lost about $200million in net worth because of it. Bam!

 

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Every little counts...
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Even less loss than a few hundred Gs. LS. Selling the stock at a big fat loss triggers a capital loss that can be used to offset capital gains.
 

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But Ken Lay, GOP contributor, walks the streets...

,,,a free man. Just goes to show that money alone doesn't guarantee justice under a Republican administration. It's WHERE YOU SPEND the money that counts.
 

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I understand the principle. I've encounter a few in my day :O) It was a worst case scenario. Just foolish on her part. Greed kills on The Street!
 

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Martha isn't a small fish, she isn't even a fish. She does need to spend six weeks in the slammer and needs to cough up $1 million in fines, as an object lesson for small AND big fish.
 
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