General News

Martha Stewart Sentenced to 5 Months in Prison

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Jul 16, 2004 | 2:00pm EDT

"I'll be back," Martha Stewart said, putting on a brave face in front of TV cameras outside a Manhattan federal court.

The homemaking maven was sentenced today to five months in federal prison and five months of house arrest following her conviction for lying about a suspicious stock trade in December 2001. US District Court Judge Miriam Cedarbaum also handed Stewart two years' probation and a $30,000 fine.

Cedarbaum said she handed Stewart the minimum sentence because she had no criminal record and the public interest had been served, adding: "I believe that you have suffered, and will continue to suffer, enough."

Cedarbaum recommended Stewart, 62, serve her time at a minimum-security facility in Danbury, Conn., which is close to her home in Westport. Stewart, however, does not have to surrender until an appeal is decided.

Her lawyers confirmed with the AP they would appeal her original conviction, insisting that there were "significant issues" that should be addressed.

Stewart's former stockbroker, Peter Bacanovic, received the same sentence for conspiring with her, The Associated Press reports.

Once outside the courtroom, Stewart, clad in a dark pantsuit, said she was angry that a small personal matter had been turned into "an almost fatal circus event ... and with such venom and gore."

"I have been choked and almost suffocated to death during that time," she added. Stewart then changed her demeanor, smiled and suggested fans could continue to show their support by subscribing to her magazines and buying her line of homemaking products.

"I'll be back. I will be back," she told reporters outside the courtroom. "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."

Stewart was convicted on March 5 of obstructing justice and lying to the government about a stock sale.

The jury deliberated three days before convicting Stewart on all counts. 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 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, 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.

Three days after the guilty verdict was issued, CBS and UPN affiliates pulled her syndicated television show, Martha Stewart Living indefinitely with no clear plans to bring it back.

Even before Stewart's conviction, her TV show's future was in question. King World, the show's syndicator, was not actively trying to renew contracts in markets where the show aired.

As her company stock fluctuated wildly following the guilty verdict, Martha Stewart Living Omnimedia's company execs released a statement that they were "deeply saddened" by the news of Stewart's conviction and said its board of directors is "evaluating the current situation and will take actions as appropriate."

The company's print and TV sales have already suffered from advertisers' reticence to place their messages alongside her likeness. The future of its homewares contract with Kmart, as well as the branding and circulation levels of the company's flagship Martha Stewart Living magazine, reamin uncertain. Stewart's branded merchandise, however, including a new furniture line, continues to sell well.

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