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Martha Stewart Sentenced

July 16, 2004 at 12:00 AM EDT


RAY SUAREZ: Martha Stewart’s sentence, five months in jail and two years of probation, including five months of house arrest, came after she was convicted on charges of conspiracy, obstruction of justice, and lying to investigators about a stock sale.

The sale in question, of stock in a company called Imclone, was made in December 2001, shortly before Imclone announced bad news that sent its share prices tumbling. But Stewart was never charged or convicted on charges of insider trading. After her hearing today, Stewart spoke on the courthouse steps about her personal travails and asked the public to support her company.

MARTHA STEWART: I have been choked and almost suffocated to death during that time, all the while more concerned about the wellbeing of others than for myself, more hurt for them and for their losses than my own, more worried for their futures than the future of Martha Stewart, the person.

More than 200 people have lost their jobs at my company as a result of this situation. I want them to know how very, very sorry I am for them and their families. Perhaps all of you out there can continue to show your support by subscribing to our magazine, by buying our products, by encouraging our advertisers to come back in full force to our magazines.

Our magazines are great. They deserve your support, and whatever happened to me personally shouldn’t have any effect whatsoever on the great company Martha Stewart Living Omni-Media. And I don’t want to use this as a sales pitch for my company, but we love that company. We’ve worked so hard on that company, and we really think it merits great attention from the American public. And I’ll be back. I will be back.

RAY SUAREZ: For more on today’s developments, I’m joined by: Constance hays, who’s been covering the story for the New York Times– she was in the Manhattan courtroom when the sentence was announced– and Hayes Roth, vice president of worldwide marketing for Landor Associates, a brand consulting firm.

Constance Hays, outside on the courthouse steps we saw a composed, smiling, occasionally defiant Martha Stewart. Is that the same woman that you saw in the courtroom when she got a chance to speak and she heard her sentence?

CONSTANCE HAYS: Not at all, Ray. Inside the courtroom she looked very juan and almost depressed. She was dressed very plainly in a black suite; she really didn’t look around much or smile.

When she stood to speak and to tell the judge why she thought she deserved a lighter sentence or leniency in general, she appeared to almost be on the verge of tears. Her voice cracked a couple times and she sniffled, and she seemed to be truly penitent at that point.

RAY SUAREZ: The federal sentencing guidelines call for a minimum of ten months. She’ll only have to serve five of them behind bars, according to Judge Cedarbaum’s sentence earlier today. Did the judge deliver any rationale about how she came to the decision she did?

CONSTANCE HAYS: Well, she gave a couple reasons. She said Martha doesn’t have a prior criminal record, which is true. She also said she’d received over 1500 letters of support saying how Martha had done wonderful things for people and the people supported her.

That was a factor in her decision. She also felt that Martha that had suffered enough and she told her that. She said, you have suffered enough and will continue to suffer.

RAY SUAREZ: In her sentencing pronouncement, did she specify that Martha Stewart can remain free pending her appeal, or is there a chance that she may be incarcerated as that wends its way through the system?

CONSTANCE HAYS: She’s going to file an appeal. She’s hired a new lawyer for that appeal. She has been ordered to go free pending the outcome of the appeal, which the timing of the appeal no one can really say for sure.

RAY SUAREZ: Well, what’s the machinery? Do documents have to be filed that then are seen by a panel which decide whether or not the appeal moves forward?

CONSTANCE HAYS: Right. She has a ten-day limit starting now in which to file notice of appeal. Then the documents can be turned over. I’m not sure exactly the deadline there, but then the appeals court has to scheduling a hearing on the appeal. That could take months.

RAY SUAREZ: Well, right now given her status as a convicted person, is she barred from holding certain positions within her own company?

CONSTANCE HAYS: Yes. She can’t be an officer or director of her company. That’s something the SEC will demand as part of the separate settlement of the SEC charges against her stemming from the same case. It sometimes can be repealed by a judge, but at the moment, you know, that’s the status for her.

RAY SUAREZ: Have you spoken to any legal experts about the chances she has on appeal? Today one of her legal team noted two people associated with the trial have been found to have lied at various points during the proceeding.

CONSTANCE HAYS: Ray, what’s interesting is her lawyers have already asked for a new trial based on the lies or perjury of those people and been rejected by the district judge, that’s Judge Cedarbaum, so it’s unlikely that would help her on appeal, but the fact is that criminal convictions are only overturned on appeal in about 3 percent of the cases, so her odds are pretty bad here.

The other thing to remember is that her company has been through a really terrible time. Some legal experts think that in asking for a new trial or asking for an appeal, she’ll just prolong the agony for the company, which has really seen some damage as a result of her own legal problems.

RAY SUAREZ: Hayes Roth, what do you think of that idea, that there’s an almost cut-your-loss prescription some people are making?

HAYES ROTH: No one would recommended the terrors of going to jail, but I think from a marketing perspective, Constance is right. I think it’s time to move on, take the medicine and become a better citizen as a result of that.

RAY SUAREZ: Today the stock shot up on the news of the sentence. Does Martha Stewart Living Omni Media stand as a pretty intact company given what’s happened to the woman that it bears the name of?

HAYES ROTH: I think they’ve done a remarkable job keeping the momentum of the company going. They’ve lost ad revenue and circulation, but the actual merchandise has sustained itself. They’re still selling a lot of product because the core product is great. The loyal customers who know her and love her believe in it.

RAY SUAREZ: So what would you recommended if you were retained for the next year or two? Does she minimize her own presence in the company’s range of products? Does the Martha Stewart name remain in boldface on all the products?

HAYES ROTH: Well, I think the Martha Stewart name is never going to get totally disconnected from the brand, but they’ve made efforts over the last year to minimize it to a certain extent. You don’t see her on the cover of the magazine anymore. It’s actually smaller in the masthead now. I think I would recommend they stay the course.

I think they’ve done a good job in keeping their eye on the ball and trying to keep the products up to the standards that were originally set, and I think how she comes back depends on how she serves her sentence and whether she’s the revitalized Martha, the perhaps chastened Martha at the end of it.

RAY SUAREZ: In allegations of crime and corporate misdeeds that have been making the news over the past several years, they’ve often involved officers of the company but also the company itself involved in misdeeds.

Martha Stewart herself noted that this was personal conduct when she said in her statement on the courthouse steps. Does that create a different situation for the company and its future, the fact that this was private conduct on the part of a well-known person rather than company misdeeds?

HAYES ROTH: I think so. I was struck by the passion of her voice when she started to talk about her company. She became a very human person at that moment. That is a company she’s built from scratch. It’s an amazing achievement. And I believe that it is a strong company. I think she will get her hands back on the wheel at some point. I’m quite optimistic about their prospects as an organization and a brand.

RAY SUAREZ: Have there been cases where someone so closely associated with the fortunes of an enterprise, so far as to even give their name to the enterprise, goes through this kind of trouble and comes out the other end all right?

HAYES ROTH: Well, there are some instances. People refer to the Steve Madden situation and also… I’m old enough to recall the Leona Helmsley era. Whether or not she came back on the other side as strong as they were going in for the hotel, the name is still on the door. It’s still a quality product. So it is possible to do. I wouldn’t recommended it as a marketing strategy necessarily, but it’s possible to do.

RAY SUAREZ: Constance Hays, when Martha Stewart emerged after her sentencing, was there a sense that the rank and file of Lower Manhattan was on her side? Did she attract a crowd when she was speaking to the press?

CONSTANCE HAYES: There was a crowd of what we call the loyal Martha followers. They come out dressed in chef hats and wearing huge sandwich boards that say, “save Martha from unfair persecution,” rather than prosecution.

And those people were out there today in force; they had a drum; they were chanting and shouting “save Martha,” and “we love you Martha,” that sort of thing, which is I’m sure is very heart warming to her in that position.

RAY SUAREZ: Is there anyway to know about wider public sentiment?

CONSTANCE HAYES: It’s not really clear. I think there is a core of Martha followers, you know, who subscribe or who watch the shows who aren’t that bothered by what’s been going on. I think they’ve always known she was human and they never assumed she was totally perfect.

Those people will stick with her. I think the advertisers are the ones who have the hardest time with this. As Hayes mentioned, the ads have fallen in the magazine. They’ve had to put the whole television show on hiatus because of concerns about ads and distribution. And that’s something that they will have to build back almost from scratch starting right now.

RAY SUAREZ: Hayes Roth, Martha Stewart spoke directly to her fans and said, “please ask the advertisers to come back.” Are the kinds of companies that advertise in a lifestyle magazine open to that kind of pressure?

HAYES ROTH: I don’t think they’re going to immediately come flooding back, and I wouldn’t call that pressure. I would call that an invitation. I would think that as they watch the company and see what happens over the next six to twelve months, if they see customers buying Martha Stewart’s product, as I’m sure they will, sooner or later they understand that’s a place to market.

RAY SUAREZ: Hayes Roth and Constance Hays, thank you both.


HAYES ROTH: Thank you.