The jury deliberated three days before convicting Stewart on all counts. The charges carry up to 20 years in prison, although Stewart will almost certainly get much less than that at her June 17 sentencing, AP reports. Her former stockbroker, Peter Bacanovic, 41, was convicted on all but one count against him, filing a false document.
Stewart was charged with dumping about $228,000 worth of ImClone Systems shares on Dec. 27, 2001, just a day before ImClone's stock plummeted after it was announced that the Food and Drug Administration had rejected the company's application for approval of a cancer drug. Stewart and Bacanovic claimed they had a standing agreement to sell when the stock price fell below $60, but the government said the story was invented to cover the fact that ImClone CEO Sam Waksal, Stewart's good friend, had told her he was trying to dump his own holdings. Waksal later admitted selling his stock based on advance word of the FDA decision and is serving seven years in prison for insider trading.
Stewart, who saved roughly $51,000 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.
The defendant, 62, grimaced as each count against her was read, AP reports, and her eyes appeared to widen slightly. Her daughter, Alexis, was in tears. Stewart 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.
"Maybe it's a victory for the little guys who lose money in the market because of these kinds of transactions," juror Chappell Hartridge told AP. But Hartridge did admit he would have liked to hear Stewart testify for herself, which she opted to forgo. "I would have liked to have heard from her," Hartridge said. "I would have loved to have heard the other side of the story."
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 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."
Stewart could have faced even more prison time than she does, but the judge threw out the most serious charge against her--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," AP reports.
Meanwhile, her own company's stock, Martha Stewart Living Omnimedia, plunged 23 percent after the verdict was announced, down $3.17 at $10.86, AP reports. Stewart may also have to step down as chairman of the board. 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.