Martha Stewart Found Guilty of Obstructing Justice
After three days of deliberation, the eight women and four men found Stewart guilty of one count of conspiracy, two counts of making false statements and one count of obstruction of agency proceedings.
The maximum penalty for the charges against Stewart includes up to 20 years in prison — but legal analysts predict she will not serve the full sentence. U.S. District Judge Miriam Goldman Cedarbaum scheduled sentencing for June 17.
Trading of shares of Martha Stewart Living Omnimedia were halted just prior to the verdict. They had jumped earlier in the afternoon as investors bet on an acquittal.
The jury also found Stewart’s stockbroker, Peter Bacanovic, guilty of making false statements, obstruction, perjury and conspiracy. He was acquitted of submitting a false document.
Bacanovic was accused of lying under oath about a message he left for Stewart on Dec. 27, 2001, the day she sold about $228,000 worth of ImClone Systems stock. The next day it was announced that the Food and Drug Administration had rejected ImClone’s application for approval of a cancer drug. The announcement sent ImClone’s stock plummeting.
Bacanovic told the Securities and Exchange Commission in 2002 that the message simply relayed ImClone’s stock price. But Stewart’s assistant recorded the message as: “Peter Bacanovic thinks ImClone is going to start trading downward.”
Stewart and Bacanovic claimed they had a prior agreement to sell the stock when its price fell below $60 per share, but the government contended that was a cover story concocted at the last minute. Prosecutors said Bacanovic knew that ImClone CEO Sam Waksal and his family were dumping their own holdings and immediately told Stewart to sell.
The government’s star witness, Douglas Faneuil, who worked at Merrill Lynch & Co. for Bacanovic, testified that when he told Bacanovic about a flurry of selling by the Waksal family, Bacanovic said: “Oh my God, get Martha on the phone.”
He also said Bacanovic pressured him to lie about the transaction.
Waksal later admitted selling his stock based on advance word of the FDA decision and is serving seven years in prison for insider trading.
Witnesses in the courtroom said Stewart reacted stoically to the announcement. In a message on her Web site, Stewart said she was “obviously distressed by the jury’s verdict but I continue to take comfort in knowing that I have done nothing wrong.”
“I will appeal the verdict and continue to fight to clear my name. I believe in the fairness of the judicial system and remain confident that I will ultimately prevail.”