Martha Stewart, stockbroker found guilty
March 06 2004 12:00 AM ET
Martha Stewart was convicted on four counts Friday of obstructing justice and lying to the government about a superbly timed stock sale--a devastating verdict that probably means prison for the woman who epitomizes meticulous homemaking and gracious living. Her ex-stockbroker, Peter Bacanovic, 41, was convicted of conspiracy, perjury, making a false statement, and obstruction of justice; he was acquitted of making a false document.
The guilty verdicts against Stewart and Bacanovic came on the heels of damaging testimony by the prosecution's star witness, openly gay Douglas Faneuil, a former Merrill Lynch and Co. assistant who said he passed a stock tip to Stewart on orders from his boss, Bacanovic. Faneuil said that when he told Bacanovic about a flurry of selling of ImClone Systems stock that morning, Bacanovic blurted, "Oh, my God, get Martha on the phone." He also said Bacanovic pressured him to lie about the transaction. Prosecutors further contended that Bacanovic doctored a worksheet of Stewart's portfolio after the fact by making the notation "(at) 60" next to her ImClone stock, which Stewart claimed was a standing order for Bacanovic to sell if ImClone fell below $60 a share. A forensics expert with the Secret Service testified that the mark was made in a different ink. In addition, Stewart's personal assistant testified that Stewart altered a computer log of a December 27, 2001, message from Bacanovic, then immediately told her to restore the log to its original wording.
Stewart, 62, grimaced and her eyes widened slightly upon hearing the verdict, and she later released a statement maintaining her innocence and promising an appeal. The convictions jeopardize the media empire that Stewart carefully built over the years in becoming the nation's premier homemaker--an image she put forth by way of magazines, TV programs, and everything from cookie cutters and garlic presses to bedsheets and pillows. Marketing experts have said that the company is so closely tied to her name and face that the effect could be crushing. The government now may press to have her removed from the board of her company. Stewart stepped down as chief executive after being indicted last summer but remains as chief creative officer. The charges carry up to 20 years in prison, but she will most certainly get much less than that under federal sentencing guidelines. She will remain free before sentencing on June 17. A jury of eight women and four men reached the verdicts on the third day of deliberations in the case. "Maybe it's a victory for the little guys who lose money in the market because of these kinds of transactions," said juror Chappell Hartridge.