How verdict will affect Stewart Inc.
Some see damage to the Martha brand, while others think hard work will bounce her back.
| NEW YORK AND SOMERVILLE, MASS.
It is the cornerstone of American justice: If you are convicted of a crime and do your time, you get a clean slate to start over.
Financier and philanthropist Michael Milken, convicted of securities-law violations, is raising money for prostate cancer and hobnobs with athletes and media moguls. Charles Colson, who pleaded guilty to Watergate-related wrongs, founded Prison Fellowship Ministries and has a daily Christian radio show called "BreakPoint." And actor Robert Downey Jr. has done several stints in drug-treatment centers, only to return to the set with solid ratings.
But can that happen when your name is Martha Stewart, and your fame and fortune have been built upon an image of American values and good taste?
Now that the perfect hostess has been found guilty of conspiracy, obstruction of justice, and lying to the government, the question of life after punishment rises once again. Many observers say Ms. Stewart the individual will be able to bounce back: The very fame that has made her an icon will help her cope with the distress of a marred reputation and possible jail time.
These observers also say her case could send shock signals to the business community, nudging it toward more transparent and ethical practices. "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."
But whether Martha Stewart the brand will survive is still unknown. Already the New York affiliate of CBS announced it would stop airing "Martha Stewart Living" as of Monday.
"A good deal of the company seems to be in person: Her face is around all the time, [and she's] a very hands-on manager," says Richard Miller, an economics professor at Wesleyan University in Middletown, Conn.
One of its major sources of income is from sales at Kmart, the discount retailer. From interviews with shoppers at a Big K in Somerville, Mass., it's clear that some customers still love her, and her products.
"I like her stuff so I'll buy it anyway," says Louise Alton of Arlington, Mass., who was meandering down aisles of Martha Stewart patchwork lace doilies and cafe curtains with her daughter and granddaughter Saturday afternoon. "I don't think she deserves to go to jail. They did her wrong."
Ms. Alton, who had a Martha Stewart lint removal device in her hand, says she buys something "Martha" almost every time she visits Big K, which she says is at least once a week. Her home is full of Martha products, from plastic containers to curtains. Her favorite: sheer curtains with flowers that adorn her living room and bedroom.
But Debbie Grant, who has worked for Kmart for 19 years, says some shoppers don't want to have anything to do with her. During the trial, she says, some customers would ask her where the non-Martha sheets, or other products, were located. A far majority of bath and bedroom products in the store, she says, are Martha Stewart.
"We just have a tiny section that's not [the Martha Stewart brand], but that's what they'd want to see. They'd say, 'Do you have anything besides Martha Stewart?' "
Some observers argue that Stewart has lost the public's trust, and that this could translate into lost advertising sales for her magazine and canceled television contracts. "I think the brand is dead as we know it," says Morris Reid, a managing partner in Westin Rinehart, a consulting firm in Washington. "She's in the trust businesses, the trust of her judgment ... and today that trust went out the door."
Jail time could be particularly devastating. The New York tabloids, for example, are already running doctored photos showing her behind bars. "People would be saying, 'Here's a convicted criminal who has gone to jail, and we don't want anything to do with her magazine.... We don't want anything to do with her," says Professor Miller.
Others, however, argue that the public will forgive her, and that her talent and extraordinary capacity to work hard will get her through the crisis. "I think she'll definitely be able to come back," says Sig Rogich of the Rogich Communications Group in Las Vegas. "Time is a healer."
Her company, nevertheless, may have to undergo major changes once Stewart starts serving her sentence. Mr. Reid thinks Stewart's daughter, Alexis, would be a great candidate to take over the company. A tall brunette, Miss Stewart was at her mother's trial almost every day.
"She's got Martha's magic because she's Martha's daughter," says Reid. "There will be a lot of sympathy out there for Martha. People will embrace her daughter."
Lawyers believe it's very likely the elder Stewart 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 prison time. The maximum sentence for the four counts she was convicted of is 20 years in prison and a $1 million fine. Lawyers say she is more likely to receive anywhere from 10 to 16 months.
"She'll have to serve some time, although not that much," says Kirby Behre, a former federal prosecutor who is now a partner at Paul, Hastings, Janofsky & Walker in Washington. "I guess we better get ready for all the decorating jail cell jokes."
Lawyers for both Stewart and broker Peter Bacanovic said they will appeal the verdict. But 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 had been considered "novel" by many lawyers, and 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 in New York. "The appeal road is a rough road."