Stewart convicted on all counts

Homemaking expert faces jail time

Friday was a bad day for Martha Stewart.

After a federal jury found her guilty of conspiracy, obstruction of justice, and making false statements, the woman who showed Americans how to fold napkins, make cole slaw and graciously decorate their homes, is now facing the very real prospect of jail time.

A jury took three days to reach a verdict, a verdict that many lawyers think is enormously significant since it sends a message that the government considers it a serious offense to tell lies to federal investigators.

"It's a seismically significant event," says D. Lloyd McDonald, a former federal prosecutor. "There is no question in the near term anyone who is being inquired by the investigative arm of the federal government and state will be much more careful about how they respond."

Mr. McDonald says the case is also important because Stewart is "a prominent symbol" of modern American business. "Without overdramatizing it, the case shows that no one is above the law," says McDonald, now a lawyer at Kirkpatrick & Lockhart in Boston. In fact, one of the jurors, after the verdict, told reporters the verdict was a "victory for the little people."

Stewart was found guilty of lying about her sale of the stock of ImClone Systems. From a brokerage assistant at Merrill Lynch & Co. she learned that the founder of the company, Sam Waksal, also a friend of hers, was trying to unload his shares after he learned the Food & Drug Administration (FDA) was not going to approve a drug his company was developing. When she was questioned by federal agents, she and her co-defendant, Peter Baconovic, a broker at Merrill Lynch, claimed they had a prior agreement to sell the stock at $60 per share. He was convicted of four counts as well.

Lawyers believe it's very likely she will face jail time when she is sentenced. Congress rewrote the federal sentencing guidelines to ensure that white collar criminals would not be able to avoid jail sentences. The maximum sentence for the most serious of the four counts she was convicted of could be as much as five years and a $250,000 fine. However, lawyers say she is more likely to receive anywhere from ten to sixteen months.

"She'll have to serve some time although not that much," says Kirby Behre, a former federal prosecutor. "I guess we better get ready for all the decorating jail cell jokes."

Lawyers for both Stewart and Mr. Baconovic said they will appeal the verdict. However, the appeal will have to be based on mistakes by the trial judge, Miriam Goldman Cedarbaum. Last week, Judge Cedarbaum threw out a charge that Stewart had deceived investors in her company, Martha Stewart Living Omnimedia, when she issued statements that she had done nothing wrong. That count was considered "novel" by many lawyers. Without that charge, the case became relatively simple. "The government ran a straight case and the judge ran a fair case," says Steve Thel, a law professor at Fordham University School of Law. "The appeal road is a rough road."

Stewart, on her web site, Marthatalks.com, said she was "distressed" by the verdict and said she would continue to "fight to clear my name." Sentencing is set for June 17th.

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